Construction has been completed at India’s 5mtpa
Mundra LNG terminal in Gujarat but the commissioning process could be postponed
because the facility is expected to close over the course of the monsoon season
from June to October.
The project, led by India’s independent energy
infrastructure developer Adani, is also suffering from the lack of a gas
pipeline connecting the facility to the target market which will make for
reduced operations until late 2019 at the earliest.
After that time, small volumes could be purchased for
the local market, sources said. But this is unlikely to exceed one LNG cargo
The pipeline connection is critical for the commercial
operations of the project since it allows Mundra to send out gas to Gujarat’s
GSPC which is responsible for the construction holds a 50% equity stake in the
project. Adani controls 25% with the remaining share still being marketed to a
While state-owned refiner Indian Oil has previously
indicated an interest in buying the stake and a preliminary agreement was
announced back in 2017, the deal is yet to be finalised.
Indian Oil expects to commission its own terminal on
the east coast of India at Ennore in the fourth quarter of this year.
The reasons for the delay are not clear, but one
source suggested that it would make sense for Indian Oil to sign this agreement
closer to the start of commercial operations at the facility.
Further re-structuring could yet come as GSPC, which
heavily relies on government subsidies, could consider selling its stake in
Given that the facility is yet to secure a long-term
supply agreement for LNG, the company could try to sell its share in the project.
“There are no underlying commitments on the part of
GSPC in terms of contractual volumes,” the source said.
Importers face challenges
Indian LNG importers are facing difficult market
As downstream gas buyers are heavily exposed to the
price of competitive fuels, they are unwilling to enter into long-term
contractual arrangements at present.
“I can get a contract with a downstream buyer for up
to six months. Three months for some. Rarely someone will sign up for a year,”
said an Indian LNG importer.
“I then have to aggregate all these customers into one
price basket and work with that in terms of annual and monthly planning,” he
This means that without sufficient commitment from
downstream buyers, securing LNG contracts on a long-term basis could be an
unjustifiable risk for new projects.