Govt Plans to avg Out Aus LNG Price with Cheaper Domestic Fuel.

New Delhi, (PTI) With LNG from Australia costing almost USD 10, the government plans to average out the price of imported fuel with cheaper domestic natural gas to make it affordable for consumers.

The price of Australian LNG to consumers "will be twice the price of what consumers pay in regions like Mumbai," Oil Secretary S Sundareshan said at a pre-event seminar of the Petrotech 2010 oil and gas conference here.

Petronet LNG Ltd, India''s largest importer of liquefied natural gas, has contracted 1.5 million tonnes a year of LNG from Australia-LNG for delivery at its under-construction Kochi terminal in Kerala from end 2014.

"The delivered price (of Australian LNG) will be totally unacceptable to consumers in Kerala," Sundareshan said.

To overcome this, the government is considering pooling of prices (averaging out price of gas from different sources so that the price to consumer is uniform through out the country), he said.

The natural gas produced by state-owned Oil and Natural Gas Corp (ONGC) and Reliance Industries, which together account for over 80 per cent of gas produced in the country, is priced at USD 4.2 per million British thermal unit. Rest of the local production is in the range of USD 4.3 to USD 5.73 per mmBtu.

In contrast, natural gas in its liquid form (LNG) from Australia''s Gorgon project will cost USD 8.82 per mmBtu if crude oil price is USD 70 per barrel in the first year. It will cost between USD 9.8-10.5 per mmBtu at the same level of oil price in the second/third year.

As against this, Petronet''s current long-term imports from Qatar at its Dahej terminal in Gujarat are around USD 5 per mmBtu.

Petronet is a subsidiary of Exxon Mobil, which is partner in the Gorgon project.

Sundareshan said while producers of natural gas and LNG importers will get differential price, there will be a near uniform price for consumers after different rates are pooled.

The modalities of pooling will be worked out in 6-8 months, he said.

"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," an industry official 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. .

Source : news.in.msn.com