India’s biggest PSU refiner and oil marketing company Indian Oil Corporation (IOC) is eyeing a bigger business in gas marketing in its endeavour to diversify and grow as an integrated energy company. The Maharatna firm has lined up initiatives to increase its gas marketing portfolio by 2022, including launching a global tender to procure LNG, said Debasis Sen, director (planning & business development) of IOC.
“Our long-term strategy is that we should be marketing about 10 million tonne of gas per annum by 2022. We have many things in plan; we have our eyes focussed on 2-3 more LNG terminals,” Sen told FE in an interview.
In FY14, IOC bought about 3.41 million tonne of re-gasified liquefied natural gas (R-LNG). Of this, 45% was consumed internally, while 55% was marketed.
IOC, which is constructing a 5-million tonne per annum (mtpa) LNG terminal at Ennore in Tamil Nadu, is also considering to have two more terminals under its ambit. The PSU is contemplating whether to go ahead and set up greenfield LNG terminals or buy equity in under-commissioning projects, explained Sen, who served as the executive director at IOC’s marketing division in his last assignment.
Petronet LNG has announced to set up a 5 mtpa LNG terminal at Gangavaram in Andhra Pradesh, while its existing terminal at Dahej in Gujarat is being expanded to 17.5 mtpa. IOC has already booked 1 mtpa capacity in the expanded Dahej terminal.
IOC will also come up with a global tender in the next two months to procure LNG in the long-term, Sen added.
When asked if the Indian gas market is mature to absorb LNG, Sen said many of IOC’s liquid fuel customers are gradually switching over to gas based on the economics of their respective business models. “Going ahead, demand from our refineries would also increase, besides there is potential available for marketing of gas for outside customers. There we have kept our eyes set. Whosoever used to be our liquid fuel customers in past years, are now switching over to gas because of the economics. There are fertiliser plants and various types of industries,” he added. IOC is setting up a 15 mtpa greenfield refinery at Paradip in Odisha.
India is expected to see increase in the flow of R-LNG as demand for the cleaner fuel rises, while domestic production staggers.
IOC will face competition from gas-marketing companies such as GAIL (India) and Petronet LNG, while going ahead in its gas marketing business. GAIL (India), India’s largest natural gas distributor, has the target to procure supplies to the tune of 5.8 mtpa from the US (starting 2017-18) at prices linked to Henry Hub. A US benchmark gas price of about $4/mBtu will mean the landed cost in India would be around $11-12/mBtu, including liquefaction and transportation rates. Sen said current supplies of IOC comprise long-term as well as spot cargoes procured from Petronet.
In March, IOC announced buying 10% stake in Petroliam Nasional berhad (Petronas) Canadian gas project, which would offer the Indian firm 1.2 mtpa of LNG for export for 20 years. The project in British Columbia is estimated to have 8.35 trillion cubic feet of gas reserves. This LNG will partly meet the requirement of IOC’s upcoming 5 mtpa Ennore re-gasification terminal in Tamil Nadu.
