Costlier Petronet gas to dig a hole into fertiliser, power sectors’ pockets

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Power and fertliser companies purchasing re-gasified LNG from Petronet LNG Limited (PLL) should gear up to pay $3-4 per million metric British thermal unit (mmbtu) more from January next year.

This is because PLL’s price contract with its customers, including the Ratnagiri power project, to sell gas (R-LNG) at a uniform price of $4.8 per mmbtu and a delivered price of $5.83 per mmbtu (after including re-gasification, transportation and taxes) comes to an end in December 2008.

The new delivered price of R-LNG for PLL’s customers is estimated to range anywhere between $8.5 and 9 per mmbtu or even higher.

PLL currently sells 24.5 million metric standard cubic meters of gas per day to its consumers in the share of 46% to fertiliser, 37% to power and 17% to others, including petrochemical and LPG units.

The R-LNG being sold by PLL is currently being imported under two separate contracts with RasGas of Qatar. The first is a long-term contract for 25 years, where PLL is importing 5 million tonne a year (equivalent to 18 mmscmd of gas a day) of LNG.

The other contract (essentially entered for meeting the gas requirements of the Ratnagiri power project) is for 1.5 mtpa of LNG.

The term of this contract is for one year and ends on September 2008.

The price of gas under the first contract (signed in 2004) has been agreed at a fixed price of $3.54 per mmbtu (excluding re-gasification, transportation and taxes) for a period of 5 years, which ends in December 2008. Thereafter, although RasGas will continue supplying LNG to PLL for the next 20 years but the price of gas will shift from the fixed price regime to a formula-based pricing.

The new price of gas—under this formula—is linked with the average price of Japanese crude cocktail (JCC) in the last five years. As a result of this shift, the price of LNG will move up from the existing $3.54 per mmbtu.

As against the first contract, the price of LNG procured by PLL under its second (short-term) contract with RasGas is much higher at $8.5 per mmbtu.

However, the supplies of R-LNG from PLL to all its consumers are made at a uniform price of $5.83 per mmbtu (including re-gasification, transportation and taxes)—which has been arrived after pooling the prices of LNG procured by PLL under the two contracts with RasGas.