Royal Dutch Shell Plc  .com Rotating Header Image India to sign 25-year deal for Australian LNG

By Nidhi Verma

NEW DELHI (Reuters) – India expects soon to ink a deal to buy 2.5 million tonnes a year of liquefied natural gas (LNG) from Australia to secure energy supplies as Asian demand grows, government and company officials said on Wednesday.

The LNG will come from Australia’s Gorgon development, said A. Sengupta, finance director at Indian gas firm Petronet LNG Ltd. .

The company expects a deal by end-June after negotiations with the project’s joint venture partners Exxon Mobil Corp. , Chevron Corp. and Royal Dutch Shell.

However, spokesman Michael Barrett said Chevron, who has already pre-sold almost all its Gorgon gas, was not the seller. Barrett said each partner was handling negotiations for sales of its share of Gorgon gas separately.

Exxon Mobil and Shell declined comment on potential Gorgon gas sales discussions.

Exxon Mobil has previously been linked with sales to India, while Shell has said it planned to sell all or part of its share of LNG from Gorgon to the North American market, via a terminal in Baja California, Mexico.

Sengupta’s comments clarified earlier remarks by Petroleum Secretary M.S. Srinivasan, who told reporters at a conference that the gas was from Australia’s North West Shelf, which may have been a reference to the region that includes Gorgon, rather than the North West Shelf (NWS) venture LNG project.

“Some delays due to environment concerns were there, but that has been sorted out. We expect to sign a deal in the next 60 days,” Srinivasan said.

“It is a 25-year contract and supplies are expected to begin in 2011.”


India, which imports more than 70 percent of the fuel it consumes, wants to ensure adequate supplies to sustain an economy growing at more than 8 percent a year. It is also negotiating LNG purchases with Iran.

Srinivasan said India’s domestic gas production was seen at 200 million cubic metres a day in the next five years. Petronet says India’s regasification capacity for LNG — gas super cooled and shipped by tanker — stands at 10 million tonnes a year.

India imposes price controls on domestic gas sales, keeping prices below world market levels. However, the LNG is destined for industrial users such as fertiliser manufacturers and power stations, which will have to pay market rates.

Gorgon’s operator Chevron won a government green light last month for the project, which has been beset by worries over its environmental impact that have pushed back first deliveries until after the originally planned date of 2010.

Chevron holds a 50 percent stake, while Exxon Mobil and Royal Dutch Shell Plc each have 25 percent. Chevron has made preliminary agreements to sell LNG to Japanese customers, including Osaka Gas Co. Ltd. <9532.T> and Tokyo Gas Co.

Gorgon is expected to have a total liquefaction capacity of 10 million tonnes a year. The greater Gorgon area has estimated gas reserves of about 40 trillion cubic feet (tcf), a quarter of Australia’s known gas reserves.

Western Australia, rich in natural gas, is home to many major LNG developments, including the North West Shelf gas field operated by Woodside Petroleum Ltd. .

NWS currently has a production capacity of 11.6 million tonnes of LNG per year and will increase to 16.3 million from late 2008. Woodside has been working to renew long-term supply agreements with Japanese customers that underpin the project.

The six equal partners in the NWS joint venture are Woodside, BHP Billiton , Chevron, BP Plc , Japan Australia LNG (MiMi) Pty. Ltd., a joint venture of Mitsubishi Corp. <8058.T> and Mitsui and Co. <8031.T> and Woodside’s 34 percent shareholder, Royal Dutch Shell.

(Additional reporting by Tom Bergin in London)

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