Impact of Additional 4 mtpa of LNG from Qatar

Qatar oil ministry has agreed to supply additional 4 mtpa of LNG to India by 2013E. The supply is expected to be ramped up from 0.3 mtpa in CY2010E to 4 mtpa in CY2013E; this is in addition to the current supply of 7.5 mn tons of LNG to India. The petroleum
ministry has stated that a share of the additional LNG from Qatar will go to Petronet LNG and RGPPL’s yet-to-be-commissioned 5 mtpa LNG Dabhol terminal.

Linking of LNG price to crude oil may be negative for LNG importing companies given (1) speculation-driven volatility in crude oil prices and (2) potentially lower natural gas price in the long term led by abundant gas supply from unconventional sources like shale and coal-bed methane.

We continue to have concerns on the acceptance of high-priced LNG in the domestic market beyond CY2013E due to likely sharp increase in domestic supply led by Reliance (NEC-25), ONGC and GSPC. The start of new LNG capacity of Petronet at Kochi will coincide with a likely steep increase in supply of domestic gas. We expect the price of domestic gas to be significantly lower versus that of imported LNG. Demand from new power plants would be key.