LNG landed cost in India: from a commodity quote to the industrial gas gate

The price label decides which costs belong in the bridge

First identify the delivery basis. A delivered-ex-ship LNG quote already includes the assumed ocean delivery to the receiving terminal, whereas a free-on-board offer needs an explicit shipping bridge. Adding a complete freight assumption to both can create a false ranking. Terminal services, downstream transmission, local distribution, marketing and losses may then sit inside or outside the quoted price. The model should reproduce the actual contract rather than apply one standard surcharge stack to every offer.

Domestic regulated gas is a different price category from LNG. The April 2023 notification established an APM linkage for specified domestic gas, and PPAC maintains the monthly price-notice repository. Those references do not make the upstream notification price the delivered price available to every industrial buyer. Current category, eligibility, allocation, applicable amendments and delivery charges must be checked separately. A database should make the distinction searchable rather than call every observation simply the gas price. [S6] [S7]

A complete, explicitly hypothetical delivery bridge

At an assumed exchange rate of INR 85/$, the model produces INR 973.25/MMBtu. If the received gas has an assumed energy content of 35.8 MJ per standard cubic metre, one MMBtu corresponds to approximately 29.47 SCM and the energy-equivalent cost is INR 33.02/SCM. Actual billing requires the contractual temperature, pressure and calorific-value basis. A visually precise cubic-metre price can otherwise conceal an inconsistent energy conversion.

Separate commodity, currency and infrastructure sensitivities

This separation makes negotiation priorities visible. A small service-fee change may matter less than a commodity index or currency movement, but the answer depends on actual exposure and quantity flexibility. The IEA’s 2025 gas outlook identifies affordability and demand growth within a broader market thesis; it is a forecast vintage, not evidence that a particular buyer’s gas will become cheaper. Retain the cost bridge even when the macro view is favourable. [S2]

Compare the cost of useful output at the plant

Suppose the alternative is fuel oil at an assumed INR 45/kg with 40 MJ/kg energy content and 82% boiler efficiency. The cost per useful MMBtu is about INR 1,447.49. Our base gas cost at 90% efficiency becomes INR 1,081.39 per useful MMBtu. The difference of roughly INR 366.10 is an operating-energy comparison before conversion investment, downtime, taxes and charges outside the stated gas boundary. It should not be presented as a guaranteed project saving.

A plant’s actual efficiency can change with load, burner performance, maintenance and fuel quality. The relevant comparison also includes process reliability and the ability to revert to the alternative fuel. A technically switchable plant can remain commercially inflexible if its gas contract has a high minimum offtake commitment. Ask engineering and procurement to sign off the same assumptions; otherwise one team’s attractive switching spread can become another team’s unused gas booking.

A five-step screen before requesting a binding offer

A disciplined buyer first confirms a common energy and delivery basis, then builds the gate-price bridge, applies actual load and efficiency, tests commodity and currency downside, and checks the cost of quantity flexibility. Require bidders to identify excluded costs and the measurement basis in writing. Keep the original price formula alongside the derived rupee price so a later update can be reproduced.

The screen is useful before a detailed project decision because it identifies which missing input matters. If the result is insensitive to a reasonable range of service costs but highly sensitive to alternative-fuel efficiency, obtain a site energy audit before negotiating another fractional tariff discount. Good market intelligence does not remove engineering uncertainty; it shows where resolving that uncertainty is commercially valuable.

A useful quotation comparison also needs a delivery and settlement calendar. Identify when the commodity price is fixed, when currency is converted, when capacity is reserved and when the customer pays. Two offers with similar delivered energy cost can leave different cash exposures if one requires advance payment or imposes a less flexible nomination profile. Run the fuel-switching test against the customer's operating schedule and minimum stable load rather than assuming the alternative fuel is available in exactly the same hours. Commercial diligence should then focus on the switching constraint: equipment capability, supply reliability, flexibility or cash timing. These are questions to verify with the site and suppliers, not benefits that the illustrative model has established.