GAIL fails to get Chevron commitment for Gorgon LNG

Vol 11, PW 11 (04 Oct 07) Midstream & Downstream

Trawling the global market for LNG is routine for Indian companies GAIL, Indian Oil, BPCL, NTPC, Petronet-LNG and Adani Energy as they try to meet unsatisfied domestic demand or feed their nascent City Gas Distribution businesses.

But sadly, their success rate is poor, thanks to an inability or unwillingness to pay market prices. Generally, world LNG suppliers do not see India as a market of first choice because domestic buyers seem inexplicably willing to buy costlier competing liquid fuels - such as naphtha - but not cheaper LNG.

This perception was once again sharply brought home to GAIL on September 6 during a visit to India by Chevron. PETROWATCH learns GAIL has been regularly writing to Chevron seeking a share of the LNG that will be produced from the proposed 10m t/y Gorgon LNG project in Western Australia.

Barring 800,000 t/y, Chevron has committed most of its 5m t/y share of LNG from Gorgon. GAIL wants this 800,000 t/y LNG on a long-term basis either for the Dabhol power station or for its other customers in India.

During the meeting in Delhi with GAIL, we hear, Chevron made a detailed presentation on the status of the long-delayed Gorgon project and the way ahead. GAIL said it was interested in the â€کuncommitted’ 800,000 t/y LNG and that the market in India would be willing to pay a delivered price of between $6 and $7/mmbtu.

Says a source: “Chevron was unimpressed by these numbers.â€‌ But it did not directly turn down GAIL.

Instead, Chevron is learnt to have said that it was still “early daysâ€‌ to say anything about this â€کuncommitted’ quantity of LNG, as “no plans had yet been firmed upâ€‌. Commenting on GAIL’s talks with Chevron, an industry source tells us that customers in Japan and South Korea are willing to pay “much moreâ€‌ than $6 or $7/mmbtu.

“Even China is willing to pay more. India should stop expecting to be treated any differently.

â€‌ Says another industry source: “It is time (LNG) buyers in India realise that today they are in a seller’s market. There are many more buyers than availability (of LNG).