UPDATE 1-Pipe network may curb India's LNG imports-Petronet

By Nidhi Verma

NEW DELHI, June 25 (Reuters) - The lack of a proper pipeline network and rising local gas supplies could curb India's liquefied natural gas (LNG) imports, the head of Petronet LNG (PLNG.BO), the country's biggest LNG importer, said on Thursday.

Many big cities and industrial towns are still not linked to the pipeline network in India, as shortages of gas have discouraged the expansion of pipelines.

"If pipeline capacity does not create problem for us, we don't see a problem to order more. Demand is there but all existing pipelines are chock-a-block," Prosad Dasgupta told reporters after its annual shareholders meet.

Increased supplies, including from Reliance Industries' (RELI.BO) east coast block, are expected to help develop India's pipeline network but they could also dent demand for LNG.

In February Petronet bought 10 spot LNG cargoes from various places for deliveries during April-October at a price below $5 per million British thermal units (mmBtu).

"Five have already been sold and five are yet to come," Dasgupta said.

At present, Petronet buys 5 million tonnes a year of LNG from Qatar's Rasgas under a long-term contract and another 1.5 million tonnes from BP and others for its 10 million-tonnes-a-year Dahej terminal.

Imports from Rasgas are due to rise to 7.5 million tonnes from the last quarter of this year, and Dasgupta said Petronet would then be importing 120 LNG cargoes in a year through its long-term contract to meet 75 percent capacity of its terminal.

For the balance of 2.5 million tonnes, or 40 cargoes, Petronet planned to tap only the spot markets after firming up customers, he said.

The cost of a 2.5 million tonne plant Petronet is building Kochi in southern Kerala state would be up to $150 million lower than expected, finance director Amitava Sengupta said.

"We are expecting it to cost $700-725 million from the earlier estimates of $850 million due to decline in input costs ... availability of contractors has improved due to slowdown," Sengupta said.

Petronet recently signed an agreement with Exxon Mobil (XOM.N) to buy 1.5 million tonnes a year of LNG for 20 years Australia's Gorgon project for the Kochi plant. (Editing by John Mair)