In signs it may shelve the USD 2.5 billion Tellurian deal, Petronet LNG Ltd on Thursday said it has no plans to invest in LNG projects as the market is awash with cheaper fuel. Petronet, India's biggest gas importer, had on September 21, 2019, signed a Memorandum of Understanding (MoU) for the purchase of up to 5 million tonnes per annum of liquefied natural gas (LNG) from Tellurian Inc's proposed Driftwood LNG terminal for 40 years.
The deal was concurrent with Petronet making an equity investment of USD 2.5 billion for an 18 per cent stake in Driftwood. The September MoU contemplated the conclusion of the transaction by March 31, 2020, but the timeline was extended twice, the latest till December-end.
In the post-second-quarter earnings call, Petronet Director-Finance V K Mishra said the Tellurian deal is non-binding and "there is no obligation on either party". "LNG is available at a throwaway price and so there appears to be no need to invest in liquefication terminals," he said.
The MoU with Tellurian envisages exploring options for a deal, which so far hasn't happened, he said, adding the deal was to secure LNG at cheaper rates. But with the fuel being available in abundance at a throwaway price, there appears to be no need for investment, he said. "It is not lucrative to invest." There is no progress on the MoU with Tellurian, he said, adding the market is subdued and LNG is easily available.
Mishra said the company, which operates two LNG import facilities at Dahej in Gujarat and Kochi in Kerala, is continuing to discuss a new long-term LNG contract linked to spot or current prices. Petronet is also looking at expanding Dahej terminal capacity to 19.5 million tonnes per annum from the current 17.5 million tonnes by adding additional storage tanks, he said.
The firm is awaiting final approval from Sri Lankan authorities to build a floating LNG terminal in the island nation for about USD 300 million. US energy upstart Tellurian had failed to qualify in a tender for supply of competitively priced gas.
Hoping the repeat his success at Cheniere Energy — the US liquefied natural gas pioneer — energy tycoon Charif Souki launched Tellurian four years ago, but the 27.6 million tonnes per annum (mtpa) plant, costing USD 30 billion, remains unbuilt years after construction was due to begin. The LNG market has been pummelled as the coronavirus pandemic has sapped demand.
Tellurian would have been the first long-term LNG import contract signed since the Narendra Modi government came to power in 2014. All the previous deals — 7.5 mtpa with Qatar, 1.44 mtpa with Australia, 2.5 mtpa with Russia and 5.8 mtpa with the US — were signed during the Congress-led UPA regime.
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