BPCL bids out its Dahej LNG re-gas capacity
Bharat Petroleum is offering some of its booked LNG regasification capacity at Dahej to others in a move designed to mitigate its 'use or pay' obligations.
On March 7 (2024), BPCL invited EoIs for up to 500,000 t/y capacity at Dahej for three years, extendable by one year on mutual agreement. Under the 'use-or-pay' deal, whoever wins must pay whether or not they use the capacity during the contract term.
BPCL will evaluate EoIs and shortlist those eligible to participate during the bid submission timeline from April 8 (2024) to April 22 (2024). BPCL's move comes just weeks after Petronet-LNG director finance Vinod Mishra announced a formula to recover outstanding use-or-pay bills of Rs1263cr ($152.4m) from Dahej offtakers, including BPCL, on January 30 (2024).
Mishra said Petronet-LNG would give offtakers a three-year grace period to honour their outstanding LNG volumes pending since 2021 and 2022, with offtakers asked to provide bank guarantees equivalent to how much they owe. "And if the offtaker fails to cover the shortfall, then the bank guarantee will be encashed," we hear.
While figures for 2021 are unavailable, BPCL must pay Rs26cr ($3.1m) to Petronet-LNG under the use-or-pay charges for 2022. "BPCL is thinking smart (by inviting EoIs for some of its Dahej capacity)," says an industry source.
"Not only is BPCL safeguarding its bank guarantee given to Petronet-LNG, but it is also providing an opportunity to those who can't independently book regasification capacity with Petronet-LNG." Another source expects strong interest in the EoI notice as many gas consumers now see gas trading on the Indian Gas Exchange (IGX) as a good income generation option.
In 2022-23, 2876 trades took place on the IGX worth Rs6490cr ($783m). In the EoI notice, BPCL stresses that the process is only for booking regasification capacity and that whoever wins will be "responsible for sourcing LNG independently from the global market."
Whoever quotes the highest regasification rate in Rs/MMBTU exceeding the floor price will be preferred. Dahej regasification charges today stand at Rs59/mmbtu ($0.71).