Our Bureau

New Delhi , Jan. 7

THE LNG supply price in the Indo-Iran oilfield-for-LNG deal has been described as "fairly competitive" by the power sector generation utilities, especially if the rate stays below $3 per million British thermal units (mmbtu).

The deal, which was signed today, provides for import of 7.5 million tonnes of LNG from Iran at a price of $1.2 plus 0.065 of Brent crude average, with an upper ceiling of $31 a barrel on Brent prices.

At the upper Brent crude price of $31 dollars a barrel, the LNG cost would be $3.21 per mmbtu.

According to analysts, the most recent benchmark is of the Reliance LNG supply price for supply of three million tonnes of natural gas for NTPC's gas-based plants, where Reliance quoted an ambitious delivered price (inclusive of transportation, taxes and duties) of $2.97 per mmbtu.

Supplies for the contract are to start from 2007, while in case of the Indo-Iran LNG deal, supplies would begin from 2009.

"The Reliance quote is the final delivered price of gas, so it looks even more competitive compared to the pre-regassification LNG rates in case of the Indo-Iran LNG deal," an industry source said.

Reliance Industries had bagged an NTPC order to supply three million tonnes of natural gas per annum for the latter's proposed 1,300 MW power stations at Kawas and Gandhar in Gujarat for 17 years.

The gas price has an 85 per cent fixed component, while the remaining 15 per cent is indexed to the inflation rate.

"At the price quoted by Reliance, the power generation cost would be around Rs 2 per unit of electricity, with fuel comprising Re 1 per unit in the first year," an NTPC official said. At the Indo-Iran LNG supply rate, the generation price would be much higher, according to an analyst.

The Indo-Iran deal, however, seems quite competitive when compared with other existing LNG supply contracts currently under way.

ONGC's delivered gas price to the power industry from its Bombay High fields is nearly double the Reliance quote for NTPC. Petronas LNG, which competed with Reliance for the NTPC tender, quoted $3.45 per mmbtu only for the LNG supply.

Coupled with the quote of Petronet LNG Ltd, which quoted $0.65 per mmbtu for regassification, the total delivered cost of gas at the power plant would have come to $4.14 per mmbtu as the second best price that NTPC had on offer.

"Considering this quote, the Indo-Iran deal looks fairly competitive," an industry source said.

The price offered by PLL, the only LNG supplier in the country, is much higher at over $4.5 per mmbtu in Gujarat.

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