LNG importers on alert after Cairn discovery

Vol 4, PW 8 (24 May 00) Midstream & Downstream

One company keenly watching Cairn for any announcement of how much gas it can produce from CB-OS/2 is Shell International Gas.

On 7th February this year Shell signed a 'Statement of Intent' with the Gujarat government to develop port and LNG facilities at Hazira. Shell is unable to confirm its precise LNG plans for Hazira but most analysts agree that for an LNG project to be viable one needs a terminal with a minimum capacity of 2.5m tonnes a year (t/y) - equivalent to 9.25m cubic metres a day (cm/d).

Some predict that Cairn - with its gas reserve in Gujarat - could eventually produce 10m cm/d of cheap indigenous gas from CB-OS/2. If that happens, Shell's LNG plans for Hazira will need a radical re-think.

More so given that Hazira is the obvious landfall point for CB-OS/2 gas, given its proximity to India's gas artery, the HBJ pipeline. In Gujarat, one senior official charged with formulating the state's gas policy disagrees.

"I am sure some substantive gas production will become available in Gujarat from this block," he tells Petrowatch, "Cairn tells us it looks very good, very promising etc, but the numbers are missing. When will the gas be available And how much We have to know these things.

Only then will we know how much impact it will have on the gas market in Gujarat." He adds: "You can't delineate your strategy from the results of one well. We need more data.

Cairn must come out with some kind of development plan and give production estimates." British Gas and Petronet-LNG will also be watching closely for any announcement by Cairn Energy. Both plan to begin landing first supplies of LNG at Pipavav (5.3m t/y) and Dahej (5m t/y) by 2003.