Naik supports argument that $3 gas is not possible

Vol 7, PW 6 (04 Jun 03) Midstream & Downstream

LNG SUPPLIERS who argue that $3 LNG is unreasonable have the full support of oil minister Ram Naik.

In a 5th May letter to finance minister Jaswant Singh, Naik admits that, "even with reduction in the cost of (LNG) operation" it would only be possible to reduce the price of "delivered" LNG to $4.50 per mmbtu (at $26 a barrel). Naik wants Singh to implement a number of measures within the framework of the long-awaited 'Integrated LNG Policy' (still under review) that would reduce the price to $3.75 per mmbtu to, "meet the concerns of the fertiliser and power sector consumers with regard to affordability of price." Naik asks Singh to abolish the 5% import duty on LNG; abolish the 5% import duty on capital goods for LNG projects (already reduced from 25% in this year's budget, but effective only from 1st March 2003, a move that benefits Shell, which has only just begin construction of its LNG terminal, but not Petronet-LNG, whose LNG terminal is almost complete); and finally, 'Infrastructure Status' for 'stand-alone' LNG projects, a move that would benefit both Shell and Petronet-LNG.

Until now, 'Infrastructure Status', with all its financial benefits, is granted only to LNG projects with an integrated power plant. Naik tells Singh these measures need urgent implementation because, "around 17m cm/d of LNG would be available by June next year from Petronet-LNG," and, "Shell's project at Hazira may come into operation sometime in 2005." As if we needed reminding, Naik also tells Singh of the, "large gap between the demand and supply of gas for the fertiliser and power sector." Availability is only 65m cm/d but demand is 119m cm/d, he confirms.

"Around 78% of this demand is from the fertiliser and power sector."

LNG Summit