GAIL wins cheap Petronet-LNG 're-gas' rate

Vol 17, PW 9 (28 Nov 13) Midstream & Downstream

GAIL has signed a landmark deal with Petronet-LNG that will see it pay lower regasification charges on 2.5m t/y of LNG imported at Dahej from the US and Russia from 2017.

Petronet-LNG has agreed to let GAIL pay ‘re-gas’ charges of just Rs40/mmbtu ($0.63) against Rs44.69/mmbtu ($0.71) paid now. Ratnagiri Gas charges Rs57.38/mmbtu ($0.91) for Dabhol.

“GAIL has got a great deal from Petronet-LNG,” says a source. “But ‘re-gas’ charges will increase 5% annually because of a 5% escalation clause which Petronet-LNG has with all terminal users.

” Petronet-LNG will only waive the fixed ‘re-gas’ charges if GAIL uses more than 80% of its booked capacity at Dahej. If GAIL uses less than 80% it will pay a Rs1,250,000/day ($19,982) penalty.

One condition is that GAIL will pay an interest free advance of Rs500cr ($79.79m) in four equal instalments. In total, GAIL will pay a hefty Rs16,721cr ($2.66bn) in ‘re-gas’ charges to Petronet-LNG over 20 years.

GAIL has signed three long-term LNG import contracts with the US and Russia, adding up to 8.3m t/y. Some will come to Dahej but GAIL is also booking capacity at other terminals for the rest.

This year GAIL signed a ‘Framework Agreement’ with Ratnagiri Gas for ‘exclusive use’ of up to 80% of the 5m t/y Dabhol terminal for 25 years.