GAIL (India) Ltd plans to use its Singapore-based investment arm for LNG trading. This move will make LNG sourcing cost-effective for GAIL as it can benefit from tax implication, while the domestic consumers will get LNG at competitive rates.
“We are doing an internal assessment of how efficient will it be,” GAIL's Chairman and Managing Director, Mr B.C. Tripathi, said. At present, GAIL is using the Singapore arm for investments in its projects in China and Myanmar.
Currently, GAIL is importing approximately one cargo a month of LNG to meet the domestic demand. The prevailing LNG price in the global market is $12-15/mBtu. In the domestic market LNG from long-term contracts is being sold at about $8.5/mBtu, while that from spot is being sold at higher price.
Drop in KG-D6
With the drop in output from Reliance Industries Ltd-operated KG-D6 gas fields, dependence on imported gas has increased. GAIL has been looking for long- and short-term contracts with global suppliers.
GAIL is marketing 84 mscmd of gas, and ferrying 120 mscmd to the domestic market. Of this 120 mscmd, gas from D6 gas is in the range of 32 mscmd, imported gas is 25 mscmd, that from Panna-Mukta-Tapti fields is 12 mscmd, and the remaining is administered price gas from ONGC fields.
As part of its overseas portfolio development strategy, GAIL is pursuing various gas sector project opportunities in different countries. “Based on attractiveness of the project, investment decision shall be taken,” Mr Tripathi told Business Line .
The Singapore arm
Set up in 2004, GAIL Global (Singapore) Pte Ltd is a wholly-owned subsidiary of GAIL. “We are planning to expand the operations of this company further in order to drive GAIL's overseas foray,” he added.
GAIL has made strategic investment in city gas distribution (CGD) and compressed natural gas business through equity participation in three companies in Egypt and one in China. The company is looking for further collaboration with them to pursue business opportunities. There is a 50:50 joint venture with China Gas Holdings Ltd to pursue gas sector opportunities in China.
In exploration and production business, the company has participating interest in two offshore blocks (A-1 & A-3) in Myanmar. GAIL is also a partner in the joint venture company – South East Asia Gas Pipeline Company Ltd incorporated for monetisation of gas to be produced from A-1 & A-3 blocks in Myanmar. GAIL's total investment in Myanmar for these blocks is around $418 million.