Petronet LNG Ltd has maintained that the price at which gas supplies from ExxonMobil’s Gorgon project in Australia have been contracted for is not steep.

However, if buyers such as GAIL (India) insist on a renegotiation, it has to be done within the contractual agreement.

If the Gorgon gas is brought at the current contracted price, then the landed cost in India will be about $16 a unit (gas is measured in million British thermal units).

The delivered price to the end consumers such as power, fertiliser and small and medium gas-based units will be at least a dollar more, or $17 a unit.

This has to be seen in the context of prevailing prices, A.K. Balyan, MD and CEO of Petronet, told Business Line .

At present, imported gas bought from the spot market comes at $18 a unit, gas from long-term contract is available at $13 a unit, while domestically produced gas price ranges from $4.2 a unit to $5.7 a unit.

These prices are excluding the transportation charges, marketing margins, and local taxes and levies.

“We may have the opinion that the gas is costly, but we should not take short-term decisions. This contract (Gorgon project) with Mobil Australia Resource Company Pty Ltd for LNG supply of 1.4 million tonnes annually was signed in 2009 for the Kochi LNG terminal.

“At that time this was probably the best price available and supply was assured for a 20-year period,” said Balyan.

At that time, LNG sources were limited, leading to higher prices. Today, with more gas sources available, the prices have also softened, though they are not very cheap.

Besides, this contract is linked to crude oil prices, and if crude prices soften, the gas price will automatically come down, Balyan said.

Asked whether Petronet has responded to GAIL, which is a key off-taker as well as one of the promoters of Petronet LNG, Balyan said: “We have written to all the buyers that if they want it (price) to be renegotiated then they need to examine it not only from a buyer’s point of view, but also the contractual obligations that they have. All of them have signed the contract. They need to examine the contract legally also.”

The buyers recently held a meeting, an official associated with the developments said.

“It will take some time to take a decision on the matter,” the official said.

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