BG Group lands LNG supply deal with India’s GSPC
BG Group has laid the foundations for LNG supply growth in India after completing an agreement to supply Gujarat State Petroleum Corporation (GSPC) with up to 2.5m tonnes per annum (mtpa) of LNG over a 20-year period from 2015.
The UK-headquartered company signed an initial heads of agreement to supply GSPC in September 2011, and has been in negotiations since then with the Gujarat state-controlled government (see GLM 30 September 2011).
Under the terms of the sale and purchase agreement (SPA), BG will supply an initial base of 1.25mtpa from 2015, the company said in a statement on Wednesday. This could potentially rise to 2.5mtpa after two years, although a BG spokesman said it would be subject to a number of conditions being met.
The group declined to specify the conditions, although they are understood to include a pricing element that would allow BG to divert the flexible 1.25mtpa component to other markets if there is a wide disparity between price levels in India and markets elsewhere.
Neither BG nor GSPC disclosed the exact pricing terms of the deal, although the BG spokesman said the pricing is fully oil-indexed.
The UK-based company said it would supply GSPC from its global portfolio, which includes the entire output from Egypt LNG Train 2, and is due to include the 8.5mtpa Queensland Curtis coal-seam-gas-to-LNG project in Australia by 2014. BG is also moving ahead with plans to develop a liquefaction project in Tanzania, which, in the longer term, is well-positioned to expand the firm's presence in supplying the Indian market.
GSPC currently imports LNG on short- and mid-term bases at the Dahej facility, in Gujarat, and has a 2.25mtpa capacity agreement with terminal operator Petronet. However, the state company has advanced plans to develop its own 5mtpa capacity terminal at Mundra by early 2016, in partnership with Mumbai-based Adani Group. It is planned to provide GSPC with a platform not only to meet projected demand in Gujarat, but also to expand beyond its core market in Gujarat.
GSPC holds another preliminary supply deal for up to 2.5mtpa over 25 years with London-based Gazprom Marketing & Trading, which is due to start later in the decade, although this has yet to be converted to a full SPA.
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