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    India Should Enter LNG Market As Combined Entity



India should enter the LNG market as a combined entity in order to get a better deal in terms of pricing and volume, said Petronet LNG CEO at Oil and Gas India 2013.

by: Shardul

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Natural Gas & LNG News, News By Country, , , Liquefied Natural Gas (LNG)

India Should Enter LNG Market As Combined Entity

India should enter the LNG market as a combined entity in order to get a better deal in terms of pricing and volume, said A. K. Balyan, MD & CEO, Petronet LNG while addressing an industry gathering at Oil and Gas India 2013 held in Mumbai on July 26th.

Balyan said that at present, everybody goes to the market and negotiates separately. “Instead of this approach, India should go for collective bargaining negotiations for larger volumes and better pricing,” he said. He added that Petronet LNG is ready to take a lead in this matter.

He stressed that demand for gas is continuously increasing in India and sourcing the fuel is a big challenge. Balyan added that share of gas in overall energy portfolio is expected to go up in coming future. He pointed that during the last three years share of gas has gone up from 9% to 11% in the energy mix. “Estimates show that by 2020 the share may reach 20% but I see this as a tall target and difficult to achieve,” he said.

Diversification of source should be an important aim for India, Balyan said. Qatar is a major supplier to India but recently many players have negotiated deals from Australia, Russia and the US, he said.  

As part of diversification process, Petronet LNG, in April this year, inked a deal with United LNG where the latter will supply 4 MTPA (million tons per annum) of LNG with the potential for additional supply, for a 20-year term from the Main Pass Energy Hub LNG project in the Gulf of Mexico. Wall Street reported earlier this year that the company is in talks with Russia’s Gazprom and other African nations for sourcing LNG to offset its reliance on Qatar. Wall Street in the same report said that Petronet LNG plans to double its regasification capacity to 25 million tons a year by March 2017 to make it possible to receive more LNG from Russia, the US and other suppliers.

Another point highlighted by Balyan was that India should look at different ways of contracting LNG. “The idea should be to look at various indices like Henry Hub, crude oil, etc,” he said. This would take care of the volatility and bring in a balance to the system, he added.

Balayan also recommended that India should follow the model that Japanese companies have followed where they have small equity stake in LNG project but a large off take contract. It gives these companies knowledge about the project, they are privy to decisions and get better price, he said.  

“India should have gone for this kind of approach long back,” he stressed.

Another point that India should consider is that to have a mix of long term and short term contracts, he said. Balyan added that India should also be capable of taking advantage of spot markets.

Finally, Balyan said that role of government in negotiations is very important and this should be encouraged. Citing an instance, Balyan said, “Our Qatar contract remains one of the best contracts in the world and Indian government played an important role in facilitating that.” 

At present, 7.5 million tons a year is being sourced through a long-term contract with RasGas, Qatar. 

This post by Shardul Sharma originally appeared on Natural Gas Asia