GAIL may import LNG at a landed cost of $10.5 per unit

According to sources from union oil ministry, the landed cost of the liquefied natural gas (LNG) to be sourced by the state-owned gas utility GAIL India from the US would be around $10.5 per mmBtu, based on the current Henry Hub price.

Gas at US Henry, LA is currently traded at around $3.78 er mmBtu. In December 2011, GAIL entered into a pact with Houston-based Cheniere’s Sabine Pass LNG terminal in western Cameron Parish, Louisiana for importing LNG from late 2016 or mid 2017. GAIL’s pact has an option to extend the agreement by 10 years.

According to the pact, GAIL would import 3.5 million tonne a year of super-cooled gas (LNG) from Cheniere Energy Partners LP for 20 years. The LNG price will be linked to a benchmark US price and included a fixed component. This is said to be the cheapest LNG to have been contracted ever by India, reports indicate.

It may be noted that India would pay nearly $13 per mmBtu to RasGas of Qatar for buying 7.5 million ton per annum of LNG at oil price of $100. LNG on a similar long-term contract with Gorgon project of Australia will cost USD 16 when at Indian port.

With domestic demand outstripping supplies by a wide margin, India’s reliance on LNG, super-chilled for shipping by tanker, is bound to increase.

Currently, domestic supplies of 105 million standard cubic metres per day will be able to meet just two-thirds of the demand, reports indicate.