GAIL (India) Ltd has pre-poned the supply of gas from the US and is looking to contract more LNG next year as it doubles down efforts to secure affordable energy supplies to meet the needs of Asia’s third-largest economy, chairman Manoj Jain said.
India’s No.1 gas transporting and marketing firm has long-term liquefied natural gas (LNG) supply contracts from the US to Australia and with Russia, supplementing domestic gas supplies.
“In 3Q (October-December 2021) we preponed a couple of cargoes (LNG shiploads) from supplies that we were to receive next year and we did it again in the current quarter,” Jain told PTI.
This because US LNG costs one-third of the price of gas available in the spot or current market.
GAIL has a 5.8 million tonnes per annum LNG contract with US suppliers. These are all linked to the US gas market, Henry Hub where the current rate is USD 5.45 per million British thermal unit. In comparison, the spot price of LNG in Asia is USD 15.5 per million British thermal unit.
“We have been conscious in tying up gas supplies and our basket is pretty diversified, balancing risks,” he said.
To make up for the next year’s volumes already taken and to meet rising demand, GAIL will soon float a short to medium-term tender to source LNG.
“We may look at the supply of one or even more cargo every month beginning early next year for a 3 to 5-year term,” he said. “We are in the process of estimating the demand and will finalise the size and other details in some time.”
GAIL is also doing destination swaps to cut shipping costs of US LNG. Under this, it would sell the US LNG to a buyer say in Europe and get an equivalent volume from a supplier nearby like in the Middle East.
Gas demand, he said, is already above pre-Covid levels and it will continue to rise further with the expansion of the city distribution network for CNG and piped cooking gas in more areas as well as the start of fertilizer plants.
GAIL reported its higher quarterly net profit in three months to December 2021 as margins improved. “Gas transmission volumes increased 3.6 per cent year on year to 114.3 million standard cubic meters per day in 3Q and we expect volumes to rise 5-6 per cent every year for the next couple of years due to increase in supplies to city gas and fertilizer plants,” he said.
The firm traded (or sold) 96.6 mmscmd of gas in 3Q and the same is likely to rise by up to 6 mmsmd in coming months as supplies to new fertilizer plants in the east starts, he said.
While gas transmission volumes are projected to rise to 131 mmscmd by FY24, trading volumes may surge to 104.5 mmscmd by March 2024.
Besides the US, GAIL gets 2.5 million tonnes per annum of LNG from the Gazprom of Russia. Through Petronet LNG Ltd, it gets 4.8 million tonnes of LNG on a long-term contract from Qatar and another 0.4 million tonnes from the Gorgon project in Australia.
GAIL had first signed time-swap deals for its US LNG in 2017-18. Under three deals signed that year, the company bought LNG from international companies and sold an equivalent amount of Henry Hub-indexed volumes during 2018-19.
That time-swap was done as it did not find buyers for imported LNG.
Jain said gas is the transition fuel towards the goal of reaching net-zero by 2070.
“The government has set a target raising the share of natural gas in the primary energy basket of the country to 15 per cent by 2030 from current 6.3 per cent and we are working towards achieving that,” he said.
The massive expansion of the city gas network, laying pipelines to connect new consumption centres with sources and tapping newer customers in fertilizer, steel and refineries are part of that effort.
GAIL will complete the majority of the Urga Ganga project of connecting east with gas sources in the north and west by the middle of this year, he said adding a truck line from Mumbai to Nagpur will be laid by end of 2022.
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