GAIL to sell imported LNG to Bangladesh

Written by Pranav Nambiar | New Delhi | Updated: Dec 31 2013, 10:32am hrs
GAIL India is in talks with the Bangladesh government to lay an inter-country pipeline to export gas to the fuel-starved neighbour. The public sector gas utility plans to use the Hiranandani Groups upcoming offshore liquefied natural gas terminal at Haldia, West Bengal, to import LNG from multiple sources and supply 3.6 million metric standard cubic metres per day (mmscmd) of the fuel to consumers in Bangladesh by extending the proposed 2,050-km Jagdishpur-Haldia pipeline.

GAIL is also working on a deal with Pakistan to offer it around 5 mmscmd of LNG from the Dadri-Bawana-Nangal pipeline. This indicates that even as Indian consumers like power and fertiliser units are vying for gas linkage, many of them finding LNG unaffordable, encouraging those in the LNG business like GAIL to look for markets abroad.

LNG usually costs four to five times more than domestic natural gas, which is currently sold at $4.2 per million metric British thermal units (mmBtu). While spot LNG prices are now quoting around $ 18-20 per mmBtu, GAIL has locked in long-term LNG import contracts with the US at Henry Hub prices and Australian gas at 14.5% of current ruling oil prices. GAIL also has such contracts with firms in Russia and Qatar.

According to GAIL director, (marketing) Prabhat Singh, the company could utilise its proposed Jagadishpur-Haldia pipeline to connect to Bangladesh. From the Jagadishpur-Haldia pipeline we will need to add another 50- km pipeline to Bangladesh. A 100-km pipeline will also be required to connect the proposed LNG terminal to the land, and a further 70-80 km to connect it to the Jagadishpur-Haldia pipeline. In total, we might require about 220 km of pipelines, he said.

Bangladesh has been facing gas shortages for the past five years with a daily demand of 2,750 million metric cubic feet per day (mmcfd). The national oil company Petrobangla is able to supply only 2,300mmcfd of gas, leaving a shortfall of 450 mmcfd.

GAIL will also benefit as the imported gas might help the company kick-start its stalled Jagadishpur-Haldia pipeline. RD Goyal, director (projects), GAIL, said that the Jagadishpur-Haldia pipeline has been kept on hold as it was meant to transport gas from Reliance Industries KG-D6 gas fields, which have now seen a big slump in production. Also, GAIL is awaiting the revival of the defunct fertiliser plants en route the Jagadishpur-Haldia pipeline like Kanpur Fertiliser and Cement, Fertiliser Corporation of Indias plants at Sindri and Gorakhpur and Hindustan Fertiliser Corporations plants at Barauni, Durgapur and Haldia.

Hiranandani Group firm H-Energys LNG terminal is expected to be operational by the end of 2015 and is being set up to supply natural gas to West Bengal, Jharkhand and Bihar and some northern states through the proposed Jagdishpur-Haldia pipeline. Kolkata, is only about 80 km from the Indo-Bangladesh border at Petrapole, and further down is the gas grid of Bangladesh passing through Jessore.

Bangladeshs existing recoverable gas reserve of 16.36 trillion cubic feet is set to be exhausted within the next decade. As a result, the Bangladesh government is planning to also set up its own floating LNG import terminal close to Chittagong with a capacity to handle 5 million tonnes per annum of LNG. Like in India, the major chunk of gas consumption in Bangladesh is by the power and fertiliser sectors. Natural gas and solid biomass and waste account for the majority of Bangladeshs total primary energy consumption with the remainder being oil, coal and hydro.