Total Expands its LNG Footprint in India
Total has expanded its partnership with the Adani Group to further develop Indian natural gas market.
The Indian natural gas market is currently only seven percent of the energy consumption but has grown over the last three years by more than five percent per annum, supported by an active policy of the Indian Government that aims to diversify its energy mix and develop domestic use of gas in cities and as fuel for vehicles. India has set the ambitious target of increasing the share of natural gas in its energy mix to 15 percent by 2030.
The 50-50 partnership between Adani and Total includes two import and regasification LNG terminals: Dhamra in East India and potentially Mundra in the West, as well as Adani Gas Limited, one of the four main distributors of city gas in India of which Adani holds 74.8 percent and of which Total will acquire 37.4 percent.
As part of this partnership, Total will bring its LNG and retail expertise and will supply LNG to Adani Gas Limited. Total and Adani will also establish a joint venture to market LNG in India and Bangladesh.
Taking into account the divestiture of the Group’s interest in Hazira terminal early 2019, the establishment of this partnership on gas in India represents a net acquisition cost for Total of approximately $600 million over 2019-2020.
Wood Mackenzie research director Nicholas Browne said: "Total’s investment in Adani is undoubtedly a show of faith in India’s gas demand growth. Gas currently accounts for just under six percent of energy demand in India. The government has a target to increase this to 15 percent by 2030. While we don’t consider this likely, gas demand is set to grow considerably. Wood Mackenzie forecasts LNG demand will double from some 37 billion cubic metres (bcm) in 2018 to reach 75 bcm by 2030, equivalent to seven percent of the energy mix. LNG will meet approximately 50 percent of this demand growth, providing a major growth opportunity for Total.
"Adani is attractive to Total for several reasons. Firstly, the development of the Mundra and Dhamra regasification terminals provides Total with market access for LNG. These terminals are also on the east coast where there is less competition from other terminals. Secondly, Adani Gas was an active bidder in the recent distribution auction rounds. It is planning to expand the pipeline network. In turn, this will provide Total with firm demand for gas. Lastly, developing a standalone gas marketing and distribution business in India would take several years. Working with Adani will accelerate the process for Total.
"Total has been aggressively expanding its LNG footprint. It took over Engie’s LNG portfolio in 2018 and recently sanctioned investment in Arctic-2 and the takeover of Anadarko led Mozambique project. It has access to competitive supply that it can provide Adani. However, the global LNG market is already competitive currently to place LNG volumes. So Adani would not have been short of alternative competitive suppliers. As such, for Adani this is likely to be more about de-risking an investment in expansion while also bringing in a global leader in gas and LNG to support this."