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The future is here-III: GAIL has no control over its future
Jun 21: GAIL faces a tough task in pushing its committed US cargoes into India in the face of trenchant demand for imported gas.
8The company was initially looking at Europe as a demand source but competitive pipeline supplies by Russia and other low cost LNG producers mean that GAIL will not be able to offload its cargoes there
8GAIL has been unable to work out long term cargoes contracts with global LNG traders or suppliers for its US commitments but for a small quantity sold to Shell.
8Why is India then a market for GAIL's LNG particularly when it is already well supplied with LNG from everywhere?
8This is because the gas major thinks that its monopolistic supply infrastructure along with its ability to mix supplies from other sources will allow it to package a good deal to the customer.
8But the problem is that GAIL's landed cost of US LNG is going to be expensive in relation to cargoes from elsewhere.
8The exact loss to GAIL from being forced to unload its supplies to India is still not clear but it is going to be very high indeed.
8The eventual cost will depend on how low spot or even contract LNG prices go in India in the coming few years, when the LNG supply glut is likely to worsen.
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