At USD 70 per barrel crude oil price, natural gas in its liquid form (LNG) from Australia's Gorgon project will cost USD 8.82 per million British thermal unit in the first year of import beginning 2014.
It will cost between USD 9.8-10.5 per mmBtu at the same level of oil price in the second/third year, an official privy to the pricing details said. Petronet LNG Ltd, the nation's largest liquefied natural gas importer, has contracted 1.5 million tonnes a year of LNG from Australia-LNG, a subsidiary of Exxon Mobil that is partner in the Gorgon project, for 20 years beginning 2014.
"The LNG is priced at 12.6 per cent of Japanese Crude Cocktail (the average price of a basket of crude oil that Japan imports). The price is capped at a maximum crude oil price of USD 70 per barrel," he said.
At USD 70 per barrel oil price, LNG will cost USD 8.82 per mmBtu in the first year of import. Another USD 1.2 per mmBtu would be the cost of shipping the LNG in crynogenic vessels from Australia to Kochi, where Petronet is building a receipt and regassification facility by 2012.
An import duty of 5 per cent (USD 0.50 per mmBtu) will be added to the landed cost before it is re-gassified at the Kochi terminal, he said, adding the final price to customer after adding pipeline transportation and local levies would be well over USD 12 per mmBtu.
The official said from second or third year, the JCC linkage would be raised to 14-15 per cent that would mean that the LNG would cost USD 9.8-10.5 per mmBtu. As against this, Petronet's long-term imports from Qatar at its Dahej terminal in Gujarat are around USD 5 per mmBtu (before regassification charges, local levies, transporation and marketing margin is levied).
Gas from Reliance Industries' eastern offshore KG-D6 fields is priced at USD 4.205 per mmBtu and the delivered price to customers in Gujarat is less than USD 7 per mmBtu.
Petronet had in August last year signed a sales and purchase agreement (SPA) with the Australian subsidiary of Exxon Mobil Corp for buying 1.5 million tonnes a year of LNG for 20 years from the proposed Gorgon LNG project.
US energy major Chevron Corp is the operator of the Gorgon project with a 50 per cent stake while Exxon Mobil and Royal Dutch/Shell hold 25 per cent each. The Gorgon Project plans to develop the Greater Gorgon gas fields, located between 130 km and 200 km off the north-west coast of Western Australia. The Greater Gorgon gas fields contain resources of about 40 trillion cubic feet of gas, Australia's largest-known gas resource.