It is a paradoxical situation. Even as India frets over the rising cost of fuel like imported liquefied natural gas (LNG), two of the country’s public sector companies are able to sell gas at a much lower price to China. State-run ONGC Videsh (OVL) and GAIL India along with its international partners are selling gas from two of their Myanmar blocks — A1 and A3 — to Chinese consumers at $9/million metric British thermal unit (mmBtu). In comparison, India pays $12-15/mmBtu for spot LNG cargoes at present.
Gas from the two Myanmar blocks are transported though a 870-km cross-border pipeline to China. Since late July, energy-hungry China has been buying natural gas from the A1 and A3 blocks.
The price of $9/ mmBtu for the Myanmar gas is comparable to domestic gas prices in China that have recently been hiked for non-residential consumers by about 15.4% to an average of 1.95 yuan per cubic metre or about $8.90/mmBtu. Pipeline imports from neighbouring countries like Turkmenistan and Uzbekistan are higher at around $10/mmBtu.
For India, this signifies a missed opportunity. OVL and GAIL officials say though they had proposed to import this gas into India through northeastern states, Beijing prevailed upon Naypyidaw to sign an agreement to supply gas exclusively to it. India now imports LNG from countries like Qatar and Australia.
Asian importers like India, China, Japan and South Korea along with Latin American countries like Brazil pay the highest prices for LNG at around $13-16/mmBtu, according to the US Federal Energy Regulatory Commission.
India’s demand for imported natural gas has been rising as domestic production has steadily declined over the last two years to 111 million standard cubic metres per day (mmscmd) in 2012-13 from 143 mmscmd in 2010-11 mainly due to fall in production of the Reliance Industries’ KG-D6 block.
At its full capacity, the Myanmar-China pipeline can supply about 12 billion cubic metres (bcm) per year. Block A-1 extends over an area of 2,129 sq km off the Rakhine Coast in the Arakan offshore field in northwestern Myanmar, while the adjacent block A-3 covers an area of 3,441 sq km.
OVL and GAIL hold a participating interest of 17% and 8.5%, respectively, in the A1 and A3 blocks, with the remaining stakes held by Daewoo at 51%, Korea Gas Corporation at 8.5% and Myanmar Oil & Gas Enterprise (MOGE) at 15%. PetroChina, which is buying the gas, has no