Cheaper gas if Dahej deal with GSPL goes through

Vol 7, PW 18 (19 Nov 03) Midstream & Downstream

Not long ago we reported that Petronet-LNG wouldnt find buyers for high-priced Dahej LNG.

How wrong we were! The proposed deal with Gujarat State Petronet indicates the exact opposite. A Petronet-LNG source tells us the GSPL deal means, we can now sit back and relax.

Confident, Petronet-LNG believes it might soon find itself in the envious position of having to turn away potential buyers. Of the 5m t/y LNG contracted at Dahej, more than 4m t/y is already gone, reveals a source.

ONGC will require 1m t/y for its C2-C3 extraction plant; GSPL wants 1m t/y. Then Indian Oil wants about 1m t/y to replace naphtha at its Mathura, Koyali and Panipat refineries.

After Panipat capacity is doubled, IOC will want 1.2m t/y. Bharat and Hindustan Petroleum also want gas for their Mumbai refineries.

For GSPL the Dahej deal will mean cheaper gas for its customers. GSPL buys (Lakshmi) gas from Cairn Energy at about $4.13 per mmbtu and sells it to Gujarat Powergens power station at about $4.35 per mmbtu.

Dahej LNG will be available at a much cheaper price of $3.33 per mmbtu. Not included is Gujarats 20% sales tax, Indias highest, and the biggest impediment to affordable regassified LNG for local consumers.

Gujarat will have no choice but to reduce sales tax to a more acceptable 4%. He adds: Sales tax is certainly expected to be reduced to about 12% very soon and to 4% in one or two years.

If Gujarat maintains high sales tax, GSPL will have no choice but to pass it on to consumers. Why is GSPL eager to buy Dahej gas They will be the first LNG supplier in the market, says a Gujarat source.

We have a strategic interest in having part of Dahej LNG flow through our pipeline system instead of entirely through GAILs system. Yet GSPL is determined to look beyond Petronet-LNG.

We could talk to other producers like Cairn Energy, Shell Hazira, British Gas for more gas.

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