Petronet-LNG needs 2.5m t/y more LNG from 2007

Vol 8, PW 6 (16 Jun 04) Midstream & Downstream

Petronet-LNG is busy deciding how to implement the companys 28th May decision to double the LNG import capacity of its Dahej terminal to 10m t/y.

Under scrutiny is the additional 5m t/y LNG that will be imported after 2007 and the ships required to transport it to India. At present Petronet-LNG has a 25-year take-or-pay contract with RasGas of Qatar for 5m t/y LNG at Dahej with an option to import an extra 2.5m t/y at Kochi or Dahej.

No decision has yet been made on where to source the balance 2.5m t/y. We have an open mind on this issue, reveals a source.

We have not yet decided whether to float a tender for this LNG or enter into negotiated contracts with suppliers. Either way the LNG could come from Iran or Yemen or Oman or Qatar.

Malaysia or Indonesia are also possibilities. Iran and Yemen are new LNG export projects; the others are already exporters who will have to increase capacity with new liquefaction trains.

Petronet-LNGs board must also decide whether the additional LNG import contract should be FOB or CIF and whether it should come east of the Suez Canal or east of India. Present indications are that it will be east of Suez and west of India.

Costs go up if the LNG source is west of Suez and east of India, we learn. Shipping is another critical issue.

Petronet-LNG only needs two ships if the source is east of Suez and west of India but three if it is west of Suez and east of India. Yemen, Iran, Oman or Qatar thus emerge as the most likely source for Petronet-LNGs balance 2.5m t/y after 2007.

Irans LNG export trains will be in operation from 2008-09 and that suits us fine. IOC and GAIL - two of the four promoters of Dahej - are in talks with National Iranian Gas Export Company for import of 5m t/y LNG from Iran.

If talks succeed Petronet-LNG expects to get half this quantity for itself at Dahej.