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International Herald Tribune: Petronet chief opens LNG buying journey

EXTRACT: The company, which has exhausted capacity at its 5 million ton-a-year terminal at Dahej, will lease 40 percent of Royal Dutch Shell’s 2.5 million ton-a- year terminal. Petronet and Shell could import up to 8 million tons in 2007, Dasgupta said. That’s equal to 5 percent of global LNG demand last year, according to consultants Wood Mackenzie. “We are leasing capacity at Shell’s LNG terminal in Hazira to import some cargoes,” Dasgupta said in a telephone interview from Delhi. “Our terminal in Dahej cannot accommodate all the additional LNG.”

THE ARTICLE

By Dinakar Sethuraman Bloomberg NewsPublished: February 15, 2007
 
SINGAPORE: Petronet LNG, India’s biggest LNG importer, sent the company’s managing director, Prosad Dasgupta, on a tour of Africa and the Middle East to buy liquefied natural gas amid a shortage caused by soaring demand in Europe and Asia.

Petronet plans to buy as much as 2.25 million metric tons of LNG, equal to about 40 individual cargoes, for delivery in the year starting in April to supply the country’s largest gas-fired power plant at Dabhol, Dasgupta said on Feb. 9, before leaving for Algeria, Oman, Qatar and Abu Dhabi on an “LNG buying spree.”

The state-controlled Petronet plans to increase LNG imports by 40 percent in the next business year, raising profit and making it the world’s largest buyer of spot cargoes. The company, shares of which have tripled since it was listed in March 2004, has gained from demand at gas-fired power stations as utilities expand capacity to ease blackouts across the nation.

“The spot market is beneficial to them because they make marketing margins,” Ballabh Modani, an oil and gas analyst with the Mumbai-based Batlivala & Karani Securities, said Wednesday.

The government bars Petronet from charging sales commission on LNG imported under multiyear contracts, in addition to a fixed fee to turn liquid cargoes into gas at its terminal, Modani said. Petronet gets about 2 percent commission on domestic sales of imported spot LNG cargoes.

The company, which has exhausted capacity at its 5 million ton-a-year terminal at Dahej, will lease 40 percent of Royal Dutch Shell’s 2.5 million ton-a- year terminal. Petronet and Shell could import up to 8 million tons in 2007, Dasgupta said. That’s equal to 5 percent of global LNG demand last year, according to consultants Wood Mackenzie.

“We are leasing capacity at Shell’s LNG terminal in Hazira to import some cargoes,” Dasgupta said in a telephone interview from Delhi. “Our terminal in Dahej cannot accommodate all the additional LNG.”

Petronet will import 13 individual cargoes in the year ending March 2007, Dasgupta said. Two cargoes are arriving from Algeria in February and March. Qatar, where production was disrupted last month, supplied one each in January and February, he said. Each cargo of LNG, gas chilled to liquid form for supply by ship, averages 55,000 tons.

Because of cargo shortages in parts of the Middle East, Dasgupta is tapping supplies from countries as far away Algeria and Egypt, making a tanker a journey twice as long to reach India compared with supplies from Qatar, Middle East, he said.

Petronet could make an additional 2.5 billion rupees, or $57 million, in operating profits next year after selling the extra spot cargoes to its customers, Modani said.

The company made a profit of 8.5 billion rupees in the three months ended Dec. 31, 2006. Sales rose 53 percent to 15.8 billion rupees in the quarter.

Locally produced gas supplies of 11 million cubic meters, or 22.2 million cubic yards, a day are not enough to meet the 17 million cubic meters required by NTPC, India’s biggest power producer, the company’s chairman, T. Sankaralingam said on Feb. 7.

The power plant in Dabhol, begun by Enron in 1996, is key to ending power shortages in Maharashtra state, home to India’s financial capital, Mumbai. The plant has never worked at more than one-third of capacity because of Enron’s collapse, disputes over power prices and a lack of gas for the furnaces.

Today, the plant operates at 15 percent, burning the costlier oil product, naphtha. It will start receiving gas through a new pipeline later this year.

Maharashtra faces a shortage of 4,500 megawatts of power, Jayant Kawle, Maharashtra’s principal energy secretary, told reporters on Feb. 5. Areas outside Mumbai face 12-hour-a-day power cuts, according to Maharashtra State Electricity Distribution.

Petronet, which is spending 16 billion rupees to double Dahej’s capacity by December 2008, is controlled by Bharat Petroleum, Oil & Natural Gas, Gail India and Indian Oil. The state companies together hold 50 percent. A new terminal in Kochi on the east coast will be completed by 2010 at a cost of 20.5 billion rupees, according to Petronet.

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