GSPC wants 16 more LNG cargoes in next 18 months

Vol 10, PW 1 (04 May 06) Midstream & Downstream

Gujarats appetite for LNG, driven by soaring industrial demand, appears insatiable.

PETROWATCH learns from sources in Gandhinagar that GSPC has requested a further 16 more cargoes over the next 18 months. Two cargoes have already arrived, we hear.

GSPC has asked Shell to supply another four cargoes in 2006 and requested at least 12 cargoes in 2007. GSPC is also trying to persuade Shell to maintain the price at current levels.

Unclear is whether Shell will oblige, given the uncertainties in the international price at which it buys spot cargoes on the open market. GSPC, for example, has already missed out on one cargo of LNG between the two that have been delivered over the last three weeks because South Korea was willing to pay an extra $0.15 cents per mmbtu.

Price, as ever, remains the key issue and its far from certain that Shell can maintain the price of $9.07 for R-LNG that it is charging now. Gujarat government sources add that soaring demand for electricity, particularly now, during the hot summer months, means GSPC might require even more than 12 cargoes next year but only if the price is reasonable.

Power generated by LNG as fuel is extremely expensive and economically unviable for the Gujarat Electricity Board, says a source. Last year it made a small profit for the first time in its history.

Gujarat government officials argue this could change if financially fragile GEB is forced to pay more. Buying R-LNG, they tell us, has already increased its financial burden by Rs300cr ($68m).

Some companies are less hesitant. This report learns at least four companies have agreed to pay Shell from $0.30 to $0.60 cents per mmbtu higher than the $9.07 per mmbtu price charged to GSPC.

Admittedly these were for smaller quantities. Gujarat today generates a total of 1658-MW of electricity using R-LNG, including 300-MW by Essar Power, 655-MW by Gujarat Paguthan, 305-MW by the Gujarat Industrial Power Company and two stations belonging to the Gujarat State Electricity Corporation: 135-MW at Utran and 107-MW at Dhuvaran.