GAIL makes first global LNG buy alone

GAIL India Ltd has purchased its first-ever LNG cargo from the international market on a standalone basis.

GAIL has purchased two spot cargos from Algeria. Two cargos purchased last week are expected to arrive soon at the Dahej LNG receiving terminal of Petronet LNG. GAIL is targeting power companies using highly expensive naphtha as feedstock for power generation to market LNG locally.

GAIL Chairman and Managing Director Prashanto Banarjee confirmed the development stating that "this is for the first time that GAIL is importing LNG on its own."

He said import of more spot cargos by the company in the near future might follow. Banarjee said GAIL was in touch with LNG sellers in the far East, Australia and the Middle East for future imports.

GAIL also plans to use part of the LNG imported for its captive requirement. However, most of it will be sold to consumers in the open market.

GAIL has been receiving queries for gas supply from its existing and new customers who face supply crunch for various reasons. Banarjee said, "We will sell LNG in the open market and use the remaining for captive purpose."

Two spot cargos are of 138,000 standard cubic meter each and have been purchased at over $9.5 per mmbtu, according to market sources.

The deal was struck through Petronet LNG, of which GAIL is one of the promoters. GAIL has committed all its Petronet LNG share till 2009. So for any independent sale of LNG, GAIL is left with no choice but to source from the spot market.

Though the purchase price of LNG was on a par with the prevailing international prices, GAIL said it would be able to sell it to consumers using naptha which was priced as high as $20 per mmbtu equivalent of energy.

"The Kawas power station of NTPC, located in Gujarat, has been using naphtha for power generation. There are many such power stations where we can offer our LNG," said Banarjee.

He said GAIL was in touch with NTPC and other prospective buyers that are ready to replace their costly naphtha with less expensive LNG.

Interestingly, more and more consumers using naphtha have accepted the over $9 per mmbtu price of LNG more or less as a reality.

For its recent two shipments of LNG, Shell has found buyers ready to pay $9.5 per mmbtu, which according to market sources shows changing trend in domestic LNG market.