The Telegraph
Since 1st March, 1999
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Petronet closer to price cut

New Delhi, April 7: Petronet LNG has slashed its internal rate of return from 16 per cent to 12 per cent for the Dahej project at the behest of RasGas of Qatar which wants the Indian companies to lead the way in lowering the price of liquefied natural gas (LNG) to be imported at the Dahej terminal.

Similarly, Gail India, which will carry and market the gas through its pipeline network, has also agreed to lower its transport charges and marketing margin. Petronet LNG is a consortium comprising Indian Oil Corporation (IOC), ONGC, BPCL and Gail.

Sources disclose that Indian companies have reduced their projected profits to take a collective hit of 70 cents per million British thermal units (MBTU). The government has, on its part, agreed to reduce taxes on LNG.

These companies now expect RasGas to also lower its expected profit margin so that the delivered price of imported gas comes down from the projected $ 5 per MBTU to somewhere between $ 3 to $ 3.5 per MBTU.

Under the deal signed between Petronet LNG and RasGas, the price of LNG to be imported from Qatar was linked with the international price of crude. This worked out to around $ 5 per MBTU even at a price of around $ 20 per barrel. However, there are no buyers for the gas at this price.

The bulk of natural gas is consumed by power and fertiliser units both of which are sold at a regulated price in the country. Given the price at which power and fertilisers are sold in the country, these units cannot afford to pay more than $ 3 to $ 3.5 per MBTU for natural gas which goes as an input. Any price for gas higher than this would render them unviable and they would only end up going the Dabhol way.

The deal with RasGas was signed when Vazapathi Ramamurthy was the minister for petroleum and natural gas.

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