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GAIL's 5.8 MMTPA US LNG offtake obligation-III: Losses can be dangerously high
Feb 22: What is the volume of loss that GAIL will endure as a LNG offtake obligation in the US?
8At $ 1/mmbtu, the loss from Sabine Pass per year for GAIL comes to Rs 1100 crore and from Cover Point another Rs 780 crore, totaling up to Rs 1800 crore
8At $ 2, the loss is Rs 3800 crore
8At $ 3, the total comes to a staggering Rs 5400 crore.
8The consignments were initially meant for India but an over supplied market in Asia now means that GAIL will have to compete with more experienced and deep pocketed companies such as Shell and Exxon Mobil for share of the markets in Europe and South America.
8The problem is further accentuated by the fact that its does not have a dedicated fleet of vessels to deliver the LNG. The prediction is that spare LNG vessel capacity will dry up by the time obligations to uplift US cargoes come into play.
8The gas major is trying to enter into swapping contracts, which is to to sell its US gas to LNG buyers in Europe (served by the Middle-East and Africa) and procuring gas for India from the Middle-East, leading to material reductions in freight cost.
8But this is not going to be that easy to handle as a lot of others will try to outwit GAIL in the game.
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