India's near-term prospects for LNG imports brighten

India's near-term prospects for importing liquefied natural gas have brightened.

Two major international corporations have offered to buy equity interests in Petronet LNG, the joint venture of four Indian state-owned petroleum companies.

Both Japan's Overseas Economic Cooperation Fund (OECF) and U.S. insurance major American International Group (AIG) have agreed to acquire minority equity stakes in Petronet LNG. AIG is also planning to pick up a 10% equity stake in Petronet India, the trunk pipeline company affilated with the LNG JV.

"We have also received similar offers from Mobil Corp. and Ras Laffan (LNG Co., a Qatari LNG export venture in which Mobil holds an interest)," said Petronet Chairman S. C. Mathur. "AIG has sought to hold discussions with us about the exact quantum of equity stake. The OECF offer is operated by (Japan's) Ministry of International Trade and Industry for environment-friendly projects."

The Mobil/Rasgas offer follows last month's agreement between India and Qatar extending the areas of cooperation in the petroleum sector, especially for the import of LNG from Qatar.

Petronet structure

About 50% of Petronet LNG's equity is held by Indian Oil Corp. (IOC), Oil & Natural Gas Corp. (ONGC), Bharat Petroleum Corp. Ltd. (BPCL), and Gas Authority of India Ltd. (GAIL).

The balance is on offer to financial institutions, international funding agencies, and strategic partners. Petronet LNG is in the process of setting up two LNG terminals, at Dahej in Gujarat and Cochin in Kerala, at a projected cost of 50 billion rupees ($1.18 billion).

The authorized capital of the company has been set at 12 billion rupees, and the debt-equity ratio at 70:30. The company plans to float subsidiaries for both of its LNG terminal projects, which will permit the respective state governments and the state industrial development organizations to take equity stakes in the projects.

Petronet LNG is also negotiating with several potential customers in the power and fertilizer sectors to commit to the regasified LNG it will import. It has signed memoranda of understanding (MOUs) with STI Power Pte. Ltd., Indo Gulf Fertilizer Ltd., Siasan Energy Ltd., and Palakkad Power Generation Co. The first two have been signed up for the Dahej terminal, while the latter two have agreed to take supply from the Cochin terminal.

The advantage that Petronet LNG offers lies in its ability to attract leading upstream and downstream public sector companies in the hydrocarbon sector. It can thus offer a dual-fuel linkage to customers.

"Since we have equity participation from both upstream and downstream companies, our consumers can be supplied with alternate fuels like naphtha, if there is a requirement," Mathur said.

Qatari LNG

Depending on how competitive the price of Qatari LNG is, Qatar could supply as much as 7.5 million metric tons/year of LNG to India, starting in 2002.

Qatar's minister for energy and Industry, Abdullah bin Hamad al-Attiyah, said India might become a partner in one of Qatar's LNG projects if it signed a long-term contract to take Qatari gas. "This is part of the package," he said, but did not elaborate.

India had floated a global tender to choose a supplier and, in response, seven international companies have bid to supply gas to Petronet LNG.

The bidders are: Malaysia's state-owned Petronas; Indonesia's state-owned Pertamina; Woodside Petroleum Ltd., operator of Australia's North West Shelf LNG project; Chevron Corp.; Total; Mobil/ Rasgas; and Royal Dutch/Shell.

Of that group, Mobil/Rasgas is considered a front-runner, largely because it is offering a stake of up to 5% in upstream supply projects, one of the conditions set by Petronet.