Petronet LNG to invest USD2.5 billion in US liquefied natural gas developer Tellurian Inc for LNG supply

NEW DELHI: Prime Minister Narendra Modi met CEOs of 17 global energy companies in Houston in interest for securing India’s energy and to expand mutual investment opportunities between the United States and India. Petronet, which is the India's largest LNG importer, inked an MoU with US liquefied natural gas developer Tellurian Inc in exchange for the rights to USD5 million tons of gas per annum for over 40 years. According to this MoU, India’s Petronet LNG Limited (PLL) and its affiliates will invest USD2.5 billion in Tellurian’s proposed Driftwood LNG export terminal for around 18% equity stake. Petronet and Tellurian will attempt to finalize the transaction agreements latest by March 31, 2020.

In a tweet, PM Modi stated that, " It is impossible to come to Houston and not talk energy! Had a wonderful interaction with leading energy sector CEOs. We discussed methods to harness opportunities in the energy sector."

Tellurian said that "Petronet, India's largest LNG importer, will be able to deliver clean, low-cost and reliable natural gas to India from Driftwood. Increasing natural gas use will enable India, currently the sixth-largest buyer of US LNG, to fuel its impressive economic growth to achieve Prime Minister Modi's goal of a USD5 trillion economy, while contributing to a cleaner environment". Tellurian's President and CEO further added, "It is an honor to sign the MoU with Petronet in the presence of Prime Minister Narendra Modi. At Tellurian, we look forward to a long and prosperous partnership with Petronet in the Driftwood project". He also stated, “Petronet will spend USD2.5 billion for an 18% equity stake in the USD28 billion Driftwood LNG terminal, the largest outside holding so far in the project, and negotiate the purchase of 5 million tonnes of gas per annum. The remainder of the total will come from debt”.

LNG find its application in automotive, power generation, marine applications, domestic and catering use. As natural gas is the cleanest burning fossil fuel, therefore the increased use of it can remarkably improve the local air quality as well as reduce carbon dioxide emissions. The liquefied natural gas consumption in India was close to 148 MMSCMD during the FY2018-19. However, domestic natural gas production is only 90 MMSCMD, therefore more than 50% of the natural gas is imported from several other countries like Australia, US and Qatar. This project would allow both the companies to work together to address the requirement for energy security. The move would also enable both the companies to deepen their energy cooperation as part of strategic partnership and supply the LNG for the next 4 decades.

According to the published report by TechSci Research, “Global Small Scale LNG (SSLNG) Liquefaction Plant Market By Capacity (Up to 0.16 MTPA, 0.17 – 0.33 MTPA, 0.34 – 0.65 MTPA, 0.66 – 1 MTPA) By Region (Asia-Pacific, Europe, North America, South America, Middle East & Africa), Forecast & Opportunities, 2024”, global Small Scale LNG (SSLNG) liquefaction plant market stood at $ 142.2 million in 2018 and is projected to grow at a CAGR of around 7.2% to reach $ 219.6 million by 2024, on account of growing LNG liquefaction plant capacities and incremental benefits of using natural gas compared with other fuels. Moreover, government initiatives of different countries across the world to reduce carbon footprint to maintain environmental sustainability are further expected to boost Global SSLNG liquefaction plant market. Asia-Pacific region is the major demand generating region for SSLNG Liquefaction plant globally, followed by Europe and Middle East & Africa.

According to the published report by TechSci Research, “India LNG Market Forecast and Opportunities, 2025”, the total opportunity for LNG in India is projected to increase from an estimated 52.34 mmscmd in 2016 to 305.10 mmscmd by 2025, registering a CAGR of more than 21% during 2016–2025. Upcoming LNG terminal projects, surging demand for natural gas in India and cost-effectiveness of LNG as compared to other alternative fuels are the major factors anticipated to positively influence the country’s LNG market over the next ten years. Government has also announced revised guidelines in “Gas Allocation Policy” to prioritize natural gas supply to various end-user segments that include City Gas Distribution for households and transport sector, fertilizers sector (urea plant), power plants and industrial sector. In addition, emergence of SSLNG market is opening up new opportunities for the industry. Other policies like E-bid RLNG are also expected to play a crucial role for supplying imported RLNG to power plants and fertilizer industry over the course of next ten years.