By SELINA WILLIAMS
LONDON -- BG Group on Wednesday said it had completed its
first substantial agreement for the long-term sale of liquefied
gas to India, one of the world's most rapidly growing
energy markets and a key customer for the super-cooled gas.
Under the agreement, BG will supply state-owned Gujarat
State Petroleum Corp., or GSPC, with up to 2.5 million
metric tpy of LNG, concluding an initial agreement announced in
September 2011. Analysts estimate the 20-year contract could be
worth around $20 billion.
The deal highlights BG's drive to focus on the exploration and production and LNG
shipping and marketing side of its business as it exits
transmission and distribution, regasification and power
generation. The company has already divested some of those
assets, including last year's sale of its stake in Brazilian
gas distributor Comgas.
The deal also underscores the growing significance to major
energy suppliers of India, where the International
Energy Agency sees natural
gas demand almost tripling to 178 billion cubic meters by
2025 from 64 bcm in 2010 under its base case scenario.
"We have been active in India for more than 15 years and it
is a large and important market that we understand well. We
expect the country to lie third among LNG
importing countries by 2025, behind Japan and China," said BG
chief executive Chris Finlayson.
Earlier this week, BG confirmed the natural
gas resource and production potential in one of its
offshore Tanzania fields and is in the process of selecting a
site for an onshore LNG
facility to export the gas.
Analysts say that East African countries such as Tanzania
and Mozambique, locations of major recent gas discoveries, are
well placed to serve growing energy demand in India, which is
already ramping up LNG imports as demand from the power
generation and other sectors outstrips domestic production.
Suppliers are already battling for the contracts with India.
Last October, GAIL (India) clinched a 20-year deal to buy LNG
from the Singapore unit of Russia's state-owned gas giant OAO
India currently imports about a quarter of its gas
requirements. But if gas
production doesn't increase faster, India may have to import as much as
half its needs within a few years, analysts say. Indeed,
several gas-fired power plants are already shuttered or
operating below capacity due to a shortage of gas.
Under the terms of the deal signed with GSPC, BG will
initially supply 1.25 million tpy of LNG beginning in 2015 and
for up to 20 years, potentially increasing to 2.5 million tpy
after two years.
GSPC will be supplied from BG's global LNG portfolio, which
means the gas could come from any of a number of the company's
projects, including giant
developments in Australia.
"Our long-term agreement with GSPC adds another dimension to
our global LNG
portfolio with the addition of material new supplies to a fast
growing market. We look forward to building our presence in the
country," Mr. Finlayson said.
Dow Jones Newswires