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Gas sector, it seems, will receive another boost with the recent announcement made by the US Department of Energy where it said that conditional authorization for export of domestically produced liquefied natural gas (LNG) has been allowed. US allowed LNG exports only to countries where it has a Free Trade Agreement (FTA).
Immediate beneficiary will be Gas Authority of India (GAIL) which has a stake in Dominion Cove Point LNG terminal, the only point through which such exports has been allowed. GAIL has recently booked 2.3 mmtpa capacity in the Cove Point LNG Terminal, which is expected to be commissioned by Dominion Cove Point LNG LP in 2017. The facility is authorized to export at a rate of up to 0.77 billion cubic feet per day for a period of 20 years.
Will this decision help other Indian companies who have invested heavily in shale gas assets (shale gas is essentially natural gas trapped in shale formations) in the US? The answer is no. There are five main investments made in the US all of which are through joint ventures. Three of these investments are made by Reliance Industries, one is a combined investment by Oil India and Indian Oil combine and another by GAIL (apart from its investment in Cove Point LNG Terminal).
Most of the shale gas investments done by Indian companies are in assets which have a higher liquid content, which gives a better yield than a dry gas well. Reliance plans to use its produce for power generation and petrochemicals while the public sector companies have made the token investment mainly for educational purpose.
Shale gas extraction technology is new and not wide-spread. Indian public sector companies intend to learn the tricks of the trade so that it can be replicated in India when the sector opens up.
Gail is the only company that will gain from US’ largesse. Transporting gas from the US to India is a costly affair, even when you own the LNG carriers. The distance in transporting the low value voluminous commodity works out to be costly when the gas lands on Indian shores.
Rather than pleading with the US government for gas exports, India would do well if it tapped into reserves closer to its shores like Burma and Bangladesh. If nothing else, at least the landed price of gas will be cheaper than what Reliance will be supplying from its KG D6 basin, whenever it discovers it.
Rather than pleading with the US government for gas exports, India would do well if it tapped into reserves closer to its shores like Burma and Bangladesh. If nothing else, at least the landed price of gas will be cheaper than what Reliance will be supplying from its KG D6 basin, whenever it discovers it.
