Adani rejects criticism of LNG import business model

Vol 10, PW 22 (08 Mar 07) Midstream & Downstream

Adani Energy strongly rejects criticism of its LNG import plans and accuses Petronet-LNG and Shell of wanting to control the market.

“It is wrong to say I’m raising expectations in the minds of sellers,â€‌ says Adani. “We know that nobody in India will pay high prices for R-LNG.

â€‌ Adani accuses both Petronet-LNG and Shell of earning margins of more than $1 per mmbtu from the LNG they import and sell in India. “When I am offering a certain price to KRIBHCO or GSPC I am also willing to sign a contract.

â€‌ Adani points out that it is ironic that nearly 90% of all LNG sold into India is used by fertiliser and power companies, “but they don’t have any say in the prices or terms they will get.â€‌ Adani accuses Petronet-LNG of turning down cheaper cargoes.

“We offered PLL one cargo (of LNG for regassification) every month at $8.20 per mmbtu, and also at $8.30 per mmbtu and $8.40 per mmbtu but they refused,â€‌ says Adani. “Instead they’ve been buying at $8.90 per mmbtu.

Who is raising expectations in the minds of sellers Not us!â€‌ Adani says Petronet-LNG is unwilling to regassify cheaper cargoes, “because it hurts their stomach. They want to keep earning the kind of margins they are getting now.

â€‌ Take a closer look at Petronet-LNG’s balance sheet, argues Adani, and it will, “reveal rising â€کother’ income, which is what the company earns from sales of spot (LNG) cargoes.â€‌ Equally culpable, says Adani, is Shell.

“In October 2006, Shell sold LNG to the US at $3.89 per mmbtu and on the same day sold LNG to India at $9.91 per mmbtu.â€‌ Adani says it knows Shell bought the LNG for India at least one dollar cheaper.

“These numbers are available in the market on industry websites,â€‌ we hear. According to Adani, Shell even sold R-LNG to NTPC at $12.27 per mmbtu but was unable to deliver it because “GAIL is unwilling to transport the gas.