No takers for expensive RasGas long-term LNG

Vol 20, PW 17 (18 May 17) Midstream & Downstream

You'd think we've traveled back in time to 2015.

But it's actually 2017 and the spread between long-term Qatari LNG prices and spot LNG is scaring away R-LNG customers in price conscious India. GAIL, the biggest R-LNG offtaker at Dahej, has since February not been taking its full 60% share of the 7.5m t/y long-term LNG landing at Dahej from RasGas.

Other offtakers IndianOil (30%) and Bharat Petroleum (10%) are facing similar problems selling long-term R-LNG to downstream customers, including power stations and fertiliser factories. "We're struggling to sell gas," admits an IOC source.

Blame the $1.50 to $2/mmbtu difference between spot and long-term prices. "The end user is not bothered whether it is long-term or spot gas," laments a GAIL source.

"He is only interested in the price at the burner tip." Consider this: on April 26, Petronet-LNG imported a spot LNG cargo from RasGas at Kochi for $5.66/mmbtu against the average $7.50/mmbtu it pays for its long-term cargoes to RasGas under the 25-year SPA signed on July 31, 1999. "I don't know what the solution is," admits a Petronet-LNG source.

"We will have to wait for the gap between spot and long-term prices to narrow." On a happier note, GAIL received a good response to its snap 24-hour May 7 tender for three spot cargoes for July, October and November delivery.