Indian biggies bid for US LNG hubs

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Publication: The Times Of India Mumbai;Date: Aug 27, 2012;Section: Times Business;Page: 17

Indian biggies bid for US LNG hubs RIL, GAIL, ONGC Eye Cheaper Shale Gas Shipments At Under $10/MMBTU
Piyush Pandey & Boby Kurian TNN Mumbai: Reliance Industries (RIL), Oil and Natural Gas Corporation (ONGC) and GAIL want to buy shares in liquefied natural gas (LNG) terminals on the east coast of the United States for shipping gas to India at about $9.5 per million metric British thermal unit (mmBtu), which will be over 50% cheaper than current imports. Massive shale gas discoveries have made US gas-surplus, with work on converting LNG complexes from regasification to liquefaction (import to export) terminals underway. Liquefaction makes it easier to store and transport gas where pipelines are not available. Indian companies with shale gas assets are interested in acquiring an operating interest in terminals to ship gas to India at less than $10, said a banker directly involved with the discussions, adding one such deal could by finalized before year-end. India is already the worlds eighth-largest importer of LNG. Those imports could rise five-fold in the next decade as domestic gas output falls and demand surges. Currently, seven LNG terminals are planned in the US to export gas. Indian companies want to ship from the US east coast just as Chinese counterparts focus on the west coast for shipment to ensure energy security. This is significant as shipments from US could become more viable than gas flowing through the Trans-Afghanistan-Pakistan-India (TAPI) pipeline from Turkmenistan in the future. The landing cost of this is estimated at $13 per mmBtu, besides the geopolitical risks. RIL has made $3.8 billion investments in US shale exploration and production assets, and is now exploring opportunities to buy stakes in LNG terminals on the east coast to ship the gas to India. RIL plans to invest another $1-1.5 billion over five years. Shale gas is expected to constitute $1-1.25 billion of EBITDA once the total investment is completed, said an RIL spokesperson. GAIL India last year bought a 20% stake in one of Carrizo Oil & Gass shale gas assets for $300 million. The gas transporter is planning to buy a stake in an LNG export terminal and has been in talks with Macquarie Energy, which has a share in the USbased Freeport LNG project. India needs gas, so equity participation in LNG projects is also required, said GAIL marketing director Prabhat Singh. ONGC chairman Sudhir Vasudeva confirmed that the state-owned giant was pursuing a stake buy in LNG terminals in the US. This month, ONGC and Japans Mitsui agreed to work together in the gas and LNG businesses. We have signed an MoU to pursue opportunities in the entire value chain of sourcing LNG to setting up a re-gasification terminal, Vasudeva said, adding that under the agreement both partners would make efforts to source LNG from international suppliers on spot, short- and long-term contract basis. The seven planned LNG terminals will allow exports to nations that have signed free-trade agreements (FTAs) with the US. With India not on this list, GAIL India chairman B C Tripathi has sought diplomatic intervention to push Washington to allow these terminals to sell gas to India. Union minister of state for petroleum R P N Singh said in Parliament that the external affairs ministry has been asked to intervene for allowing gas imports from US. One of the bankers helping Indian companies buy stakes in terminals said he expected further clarity on US gas exports in the next 18 months, by when the revamped LNG terminals would be ready. The gas shipments from US will be costlier than current domestic gas prices at $4.2 per mmBtu, which is subject to revision in 2014. RIL, for instance, is seeking price approval from the government to sell its coal bed methane gas at $12 per mmBtu. SEEKING ENERGY tUS has become gas-surplus in the aftermath of massive shale gas discoveries tFalling domestic output & surging demand expected to raise Indias LNG imports, already the eighth-largest in world, five-fold next decade tAt $9.5 per mmBtu, shipping gas from US east coast will be 50% cheaper than current imports tIt's also cheaper than $13/mmBtu projected rate for gas via proposed TAPI pipeline, which also faces geopolitical risks

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8/27/2012 2:29 PM

Indian biggies bid for US LNG hubs

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8/27/2012 2:29 PM