UK's BG set to strike $20 billion deal in India
By James Crabtree in Mumbai and Guy Chazan in London
BG Group is to unveil a 20-year contract worth as much as $20bn to provide liquefied natural gas to the fast-growing western Indian state of Gujarat.
In 2011 the FTSE 100 oil and gas company entered an initial agreement with Gujarat State Petroleum Corporation, a state-owned distributor, to explore supplying as much as 2.5m tonnes of LNG per year.
However, on Wednesday the UK group will sign a final deal confirming the full value of the arrangement and the date of its commencement, according to people familiar with the process.
Analysts said the deal could be worth $20bn, although its ultimate value depended on the fluctuating price of LNG.
The move is the first time the company has struck such a deal in India, adding to long-term supply contracts with other Asian customers, such as Tokyo Gas of Japan.
It also marks the latest stage in BGs attempt to move its business away from the distribution of gas in emerging nations such as India and Brazil, and towards supplying LNG to domestic companies in these markets.
As part of this strategy, BG sold its majority stake in distribution group Gujarat Gas to GSPC for Rs24.6bn ($470m) in October. Last year it also sold its stake in Brazilian gas distributor Comgás for about $1.8bn.
BG declined to comment on the new deal but people familiar with the company said it had been keen to deepen its presence as a supplier of LNG in India.
The company expects India to be the third-largest global importer of LNG by 2025, after Japan and China, with annual demand rising to 50m tonnes a sixfold increase from 2012.
Sir Frank Chapman, chief executive, described the groups initial 2011 deal as a landmark agreement for BG Group, establishing long-term LNG sales into one of the worlds largest and fastest growing energy markets.
As well as selling LNG, BG is also emerging as a major global supplier of the fuel. Together with Statoil of Norway, it is moving ahead with plans to build a big LNG plant in Tanzania, where the two companies have both made big gas discoveries.
It is also building a big liquefied gas facility in Queensland, Australia, and was one of the first companies to sign a deal to buy LNG from Cheniere Energys Sabine Pass terminal in Louisiana, the first US project to receive a full LNG export permit. BG is now on track to beat its target of 30m tonnes per annum of contracted LNG volumes by 2020, up from 20 mtpa in 2015.
Indian imports are set to increase in part because domestic supplies are forecast to meet less than half of total demand by 2015, according to analysis by Boston Consulting Group.
Many international companies are now looking at India, given they can get attractive prices in the market already, and tap into the countrys strongly growing demand in future too, said Rahool Panandiker, a principal at BCG in Mumbai.
Although Indias is a less gas intensive economy than most other major developing nations, Gujarat has been a pioneer of both importing natural gas and providing it to companies and consumers in the state.
BGs deal is set to coincide with a visit to the state by British Foreign Office minister Hugo Swire, part of attempts to rebuild links between the UK and the government of the business-friendly Indian state.
BG set to strike $20bn deal in India - FT.com
