Bloomberg News

Petronet Seeks U.S. LNG Terminal Stakes to Secure India Supplies

November 17, 2011

Nov. 17 (Bloomberg) -- Petronet LNG Ltd., India’s biggest liquefied natural gas importer, has held talks to invest in U.S. terminals owned by Freeport LNG Development LP and Dominion Resources Inc. to secure supplies as domestic demand rises.

“We want to get minority stakes in projects there that will give us better pricing power and assurance of supply,” Managing Director A.K. Balyan said in an interview at his office in New Delhi yesterday. “Gas production will grow in the U.S. and demand will rise in India. It’s a great opportunity.”

Petronet is also in talks with Cheniere Energy Inc. for a stake in the Sabine Pass plant and is waiting for U.S. regulatory approval for the companies to export gas. A surge in shale-gas production in North America helped the U.S. surpass Russia as the world’s biggest gas producer in 2009.

Petronet wants to buy stakes of less than 10 percent in the U.S. terminals including Dominion’s Cove Point, said Balyan, 60. The company’s LNG import capacity will increase to 25 million metric tons a year by 2015 from 10 million tons currently, he said.

“Our aim is to operate about 75 percent of that capacity on long-term contracts, which are cheaper than spot rates,” Balyan said. “We are talking to various companies for this.”

Petronet, based in New Delhi, has long-term contracts to buy 7.5 million tons of LNG a year from Qatar and 1.5 million tons from Chevron Corp.’s Gorgon project in Australia. It is in talks to increase purchases from Qatar by as much as 3 million tons, Balyan said.

Petronet signed a preliminary agreement with OAO Gazprom’s marketing and trading unit to buy as much as 2.5 million tons of LNG annually for 25 years, the Indian company said June 1.

Expansion Plan

Additional capacity for Petronet will come from the expansion of the 10 million-ton import terminal at Dahej in the western state of Gujarat to 15 million tons and the completion of a 5 million ton plant at Kochi in the south. The company will decide on a location for a new 5 million-ton project on the east coast in two weeks, Balyan said.

Petronet increased imports to meet demand in Asia’s second- biggest energy consumer after output declined from the nation’s biggest gas deposit, operated by Reliance Industries Ltd. The LNG importer’s shares have gained 30 percent this year and it’s the third-best performer in India’s BSE 200 index.

U.S. companies including Cheniere, Southern Union Co., Freeport LNG and Dominion have applied to federal regulators to build LNG export terminals in the Gulf of Mexico. Cheniere hopes to sell 14 million tons of its LNG production capacity at the Sabine Pass terminal in Louisiana by the end of March, Chief Executive Officer Charif Souki said Nov. 3.

LNG is natural gas that’s chilled to liquid form, reducing it to 600th of its volume, for transporting by ship to destinations not connected by pipeline.

--Editors: John Chacko, Amanda Jordan

To contact the reporters on this story: Rakteem Katakey in New Delhi at rkatakey@bloomberg.net; Dinakar Sethuraman in New Delhi at dinakar@bloomberg.net

To contact the editors responsible for this story: Amit Prakash at aprakash1@bloomberg.net; Alexander Kwiatkowski at akwiatkowsk2@bloomberg.net


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