Russia is Selling Cheapest LNG to India, Landmark & Long Term Development

India received its cheapest LNG under a long-term deal as Russia began shipping natural gas at a delivered price of close to $7 per million British thermal unit.

At current oil prices, the Russian rate is $1.5 per mmBtu less than the price at which Qatar, India’s oldest supplier, delivered liquefied natural gas (LNG). Russian supplies are also cheaper by $1-1.5 per mmBtu than the LNG sourced from Australia and the US.

Oil Minister Dharmendra Pradhan, who flew in here to witness arrival of first LNG ship under a 20-year import deal with Gazprom, termed the event as “Golden Day” in the India’s energy pursuit.

State-owned gas utility GAIL India Ltd had in January taken advantage of Russian company’s inability to deliver LNG from the previously agreed Schtokman project in the Barents Sea, to renegotiate price agreed in 2012.

GAIL also deferred taking deliveries of full 2.5 million tonnes a year LNG. The contract period was extended by three years to accommodate the supplies not taken in initial years as well as get an additional 2 million tonnes over-and-above the 50 million tonnes it had agreed to

take in 2012 over the 20 year contract period.

LNG carrier ‘LNG Kano’, bringing cargo from Russian supplier Gazprom, docked at Petronet LNG Ltd’s import facility here this morning.

Gazprom supplied the 3.4 trillion British thermal unit (TBtu) of cargo from Nigeria. “First we renegotiated price of LNG from Qatar, then reworked Australian supplies and now gas from Russia under renegotiated terms has started to flow,” Pradhan said after receiving the LNG cargo.

India will import LNG worth an estimated $25 billion over the contract period from Russia, he said. “Gazprom price (after being reworked) is very competitive.”

While he did not give details, sources with direct knowledge of the development said the reworked price at current oil rate comes to close to $7 per mmBtu, which is cheaper than the delivered price of LNG under the 25-year deal with RasGas of Qatar.

Also it is cheaper than Gorgon LNG from Australia and Henry-hub linked US LNG, supplies of which started only a few weeks back.

India, Pradhan said, is pushing towards a gas-based economy by raising the share of environment friendly fuel in the energy basket to 15 per cent from current 6.2 per cent.

There exists huge scope for gas usage in Indian economy — from generating power to producing quality steel, he said, adding that increasing gas share would also help the country meet its COP21 commitment to cutting carbon emission.

India is dependent on imports to meet 45 per cent of its gas needs.

Beginning of supplies from Russia comes within weeks of India importing its first ever LNG cargo from US under a long-term import deal.

Pradhan said the starting of LNG imports from Russia has added a new dimension to the Indo-Russian bilateral relations, particularly in the oil & gas sector.

Russia has emerged as a long-term source for India’s hydrocarbon imports, he said.

Stating that the Government is committed to transforming India into a gas-based economy, he said investments are being made for augmenting natural gas infrastructure, including pipelines, LNG import terminals and City Gas Distribution networks.