GAIL contracts (?) two LNG cargoes from Algeria

Vol 10, PW 1 (04 May 06) Midstream & Downstream

GAIL could be about to import its first spot cargoes of LNG to India.

This report learns the company has contracted (or is about to contract) two spot cargoes of 60,000 tonnes each for delivery in May and June to Dahej where it will be regassified by Petronet-LNG. Details are sketchy but we understand the LNG will be loaded from either the Arzew or Skikda LNG terminals in Algeria and that the first cargo is expected to reach India by 15th May.

Last week on 26th April Petronet-LNG was told to be in readiness to receive the LNG. GAIL is believed to be buying the LNG at $8 per mmbtu FOB for use as feedstock in its petrochemicals complex where it is using naphtha.

At $8 per mmbtu FOB and 96 cents freight from Algeria to Dahej, the LNG will cost GAIL $8.96 per mmbtu CIF. GAIL will have to pay $0.45 cents import tariff, $0.01 cents education tax and $0.53 cents charged by Petronet-LNG for regassification, bringing the final cost of regassified LNG at the Dahej downstream flange to $9.95 per mmbtu.

An additional 12.5% in VAT will be paid to the Gujarat government raising the price by slightly over a $1 per mmbtu. Regassified LNG at this price does look rather costly, says an industry source, but it is very cheap compared to $21 per mmbtu that GAIL is paying for naphtha at its petrochemical complex.

GAIL is believed to be on the lookout for two more LNG spot cargoes. A gas industry source tells us the FOB price paid by GAIL is more than that paid by Shell for its mid-April import of LNG to the Hazira LNG terminal.

Shell is believed to have paid a CIF price of $8 per mmbtu for its LNG. Shells LNG came from Oman, we hear.

The shipping costs to India cannot be more than about $0.20 cents. FOB price must have been about $7.80 per mmbtu.

Other charges like the import tariff and education tax are more or less similar to Dahej. Only regassification charges at Hazira are higher at $0.67 cents.

Shells R-LNG was sold at $9.07 per mmbtu at the Hazira downstream flange to Essar and Gujarat State Petroleum. Adds our source: It would have been cheaper for GAIL to buy R-LNG from Shell.