April 25, 2013 / 6:10 AM / in 5 years

UPDATE 1-India's Petronet signs initial purchase deal with United LNG

* To buy 4 mln tonnes of LNG a year for 20 years

* In talks to buy stake in liquefaction facility in Gulf of Mexico

* Petronet to commission Kochi terminal in July

NEW DELHI, April 25 (Reuters) - India’s Petronet LNG has signed an initial agreement with Houston-based United LNG to buy 4 million tonnes of liquefied natural gas (LNG) a year for 20 years, a senior Petronet executive said on Thursday.

India has been scouting for oil and gas assets abroad to meet rising local demand. Booming shale gas production following advances in drilling technology has put the United States in a position to be a net exporter.

“If everything goes well supplies from United LNG will begin in 2018. We hope to finalise commercial terms and sign SPA (sale purchase agreement) by the end of this year,” Petronet’s head of finance, R. K. Garg, told Reuters.

Asia’s third-largest economy is seeking long-term LNG contracts and aims to triple its LNG import capacity to 45 million tonnes in five years, Garg said.

India’s gas output has been curbed by problems in the D6 block off India’s east coast, operated by Reliance Industries , while state-run Oil and Natural Gas Corp is struggling to arrest declining production from an ageing field.

Fuel shortages, due to the lower local gas output and less-than-estimated coal production, have crippled India’s power stations.

United LNG would supply the super cooled gas from the Main Pass Energy Hub project in the Gulf of Mexico, Garg said, adding this would be Petronet’s first gas purchase deal with prices linked to U.S. Henry-Hub natural gas futures.

LNG is expensive in Asia , at about $15 per million British thermal units (mmBtu), as it is linked to oil, while a boom in U.S. shale gas output has pushed down prices there to around $4.2 per mmBtu.

Petronet also discussed buying a stake in United LNG’s liquefaction facility in the Gulf of Mexico, Garg said.

“The deal is preliminary, numbers and pricing are yet to be finalised,” he added.

Petronet buys 7.5 million tonnes of LNG a year under a long-term deal with Qatar at its 10 million tonnes a year LNG terminal at Dahej in western India.

It is also building a 5-million-tonne-per-year terminal in the southern Indian city of Kochi and has a deal to buy 1.5 million tonnes of LNG a year from Australia’s Gorgon project.

Kochi terminal, which was to be commissioned by end-2012, will now start operations in July, Garg said. “Commissioning is linked with readiness of consumers and pipeline network. We hope everything will be in place by July,” he added.

Petronet also aims to build a 5 million tonne a year LNG terminal at Gangavaram in the east coast by 2016.

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