Mon, Jun 17 2024 17 June, 2024

India to make LNG history with GAIL, H-Energy supply deals

India is set to become the first country in the world to export LNG in re-gasified form through cross-country pipelines as GAIL and H-Energy close in on Bangladesh supply deals.

Container ships on the Hooghly River in Kolkata, West Bengal, India (Photo: Adobe Stock/ Arnav Pratap Singh)

The South Asian region’s economic superpower – India – is eyeing to emerge as the lone exporter of re-gasified LNG (RLNG) within the next several years after laying down 265 km of pipelines in total through two separate routes to neighbouring Bangladesh.

India’s state-run GAIL and privately owned H-Energy will be supplying RLNG to two separate entities in Bangladesh after importing LNG from global suppliers.

These two companies have moved to export RLNG, after seeing India’s sluggish LNG consumption over the past several years, market analysts said.

India imported around 23.3 million tonnes (mt) of LNG during fiscal year (FY) 2023-2024 (April-March), which is 7.17% lower than the country’s highest LNG import volume of 25.1 mt during FY2020-21, according to the Petroleum Planning and Analysis Cell (PPAC) of India.

After importing its highest volume of LNG during FY2020-21 the volume of the country’s LNG imports witnessed a slide mostly due to LNG price spikes in international markets and Russia’s invasion of Ukraine.

India’s H-Energy is set to ink a deal with state-run Bangladesh’s oil, gas and mineral corporation – Petrobangla – to market RLNG, while GAIL is set to ink RLNG sales deal with Bangladesh’s privately owned Dipon Gas Company.

These two Indian companies will be exporting around 1.6-2.0 million tonnes/year (mtpa) of RLNG in total initially, which can be extended on the basis of mutual negotiations with the parties concerned.

India’s H-Energy, a subsidiary of Hiranandani Group, is eyeing to supply half of the total RLNG imports i.e. 0.8-1.0 mtpa, while the remaining half, to the tune of 0.8-1.0 mtpa, will be supplied by GAIL.

H-Energy has intended to supply RLNG from Digha in West Bengal to Khulna in Bangladesh after laying a 155 km cross-border pipeline from Kanai Chatta in East Midnapore district to Shrirampur in Khulna.

Of the total 155km pipeline, 90km will be laid inside India and 65km inside Bangladesh.

H-Energy will build the pipeline at its own cost, while Petrobangla will pay the wheeling charge for using the pipeline to import LNG.

H-Energy’s RLNG selling price will be linked with Brent Crude, keeping the price flexible to move with the price movements in international markets.

Meanwhile, GAIL will supply RLNG to Bangladesh’s southeastern Jashore district through the Benapole border of Bangladesh after laying a 110km cross-border pipeline.

Of the total 110km pipeline, 65km will be laid inside India and 45km inside Bangladesh.

GAIL will build pipeline on the Indian side at its own cost, while Bangladesh’s Dipon Gas will build pipeline inside Bangladesh at its own cost.

Dipon Gas and GAIL have not yet fixed the benchmark to fix RLNG prices.

“We are now at final stage of inking RLNG import deals with India’s H-Energy,” Petrobangla Chairman Zanendra Nath Sarker told Gas Outlook on May 17th.

All relevant issues including mode of payment, pipeline management, RLNG priceand so on, have already been discussed, he said.

India’s H-Energy will be able to supply RLNG to Bangladesh within two years of inking deals, which include laying down of pipeline and RLNG purchase and sales agreements, Sarker said.

“We are expecting to get RLNG from H-Energy by 2027,” said a senior Petrobangla official, who is involved with the negotiations.

He said RLNG from H-Energy will be used mainly to feed the 800MW Rupsha combined-cycle power plant, owned by state-owned North West Power Generation Company, for 22 years.

The remaining RLNG could be used in industries and other gas-fired power plants in the south-eastern region, he said.

The Asian Development Bank is lending around US$600 million and the Islamic Development Bank around $200 million to implement the Rupsha powerplant project with two gas-fired units, each having 400MW of capacity. The Bangladesh government intends to provide the remaining $150 million.

RLNG supply from India’s GAIL to Bangladesh’s Jashore might take less time if it could avoid major hassles of land acquisition to lay down the pipeline, said a company insider.

Dipon Gas will be utilising funds from Saudi Arabia to implement the pipeline project and import RLNG.

The Bangladeshi private company will sell RLNG initially to Petrobangla and other interested private consumers including industries and power plants.

It has future plans to set up a fertilizer factory and a power plant using GAIL’s RLNG as energy.

With this end in view, the state energy corporation, Petrobangla, had inked a memorandum of understanding with H-Energy a couple of years ago.

Petrobangla also had signed the first agreement with Indian Oil Corporation (IOCL) in 2018 for the same purpose, which, however, remained shelved after that.

In a statement on the memorandum signing, H-Energy’s CEO Darshan Hiranandani said:“This is a key milestone in the future of Indo-Bangladesh energy cooperation.Our objective is to deliver environmentally friendly, safe, and economical energy to the state of West Bengal and to western Bangladesh.

“Thanks to the efforts of all stakeholders, most permissions are in place and we shall see important milestone after milestone in this project happen at a rapid pace,” Hiranandani added.

Importing RLNG from Bangladesh will also be a first for Bangladesh.

Apart from natural gas production at domestic gas fields, Bangladesh has been importing LNG since April 2018 and re-gasifying LNG through two privately owned floating storage and re-gasification units (FSRU) on Moheshkhali island in the Bay of Bengal.

Both the FSRUs have a combined capacity to re-gasify around 1,100 MMcfd/d of RLNG.

Petrobangla pays around US$237,000/day to one FSRU owner — Excelerate Energy Bangladesh — and $217,000/day to another FSRU owner — Summit LNG Terminal Company — as LNG re-gasification charges, even if Bangladesh takes a lower volume of RLNG, or doesn’t take any RLNG.

Bangladesh also has been importing LNG from the international spot market since September 2020.

Qatargas and OQ Trading International, formerly known as Oman Trading International, are supplying LNG to Bangladesh on a long-term basis.