Gallina lands at Hazira LNG terminal with more LNG

Vol 9, PW 13 (06 Oct 05) Midstream & Downstream
     

Shells LNG terminal at Hazira, where Total has a 26% stake, took delivery of more LNG this week with the arrival of Shell-owned LNG tanker Gallina.

On (Wednesday) 5th October, Gallina berthed at Hazira with 138,000 cubic metres of LNG from the North West Shelf venture in Australia, where Shell has a stake. Gallina is the third LNG tanker to berth at Hazira since it began commercial operations in April 2005.

As with the two previous cargoes, LNG from Gallina will be sold to Gujarat Petroleum, with whom Shell has a 210-day contract to supply 700,000 cm/d LNG until December this year at the Dahej LNG price of $3.86 per mmbtu. After December, Shell and Total must find more customers.

We hear Shell is in talks with KRIBHCO, the Essar Group and Indian Oil. NTPC is also talking to Shell, we learn.

One and a half months back Shell offered RLNG to NTPC at $6.2 per mmbtu but NTPC refused saying it is too costly. Shells moves to get new customers are being keenly watched.

It will be an important event when they get new customers, we are told. It will set a new benchmark.

Shell needs to pump out a minimum 700,000 cm/d RLNG from Hazira to keep the terminal in shape. Non-availability of domestic gas or additional RLNG from Dahej in 2006-07 means should make it easier to find customers.

The market will be very tight in 2006-07, we hear. This will be good for Shell.

Essar needs about 2m cm/d to fuel the expansion of its Hazira steel factory. Naphtha at current prices of about $18 per mmbtu is clearly unaffordable.

Essar needs the gas from January 2006 when the expansion will go on stream, we are told. KRIBHCO has a contract with GAIL for 600,000 cm/d till January 2006.

But after that, supplies are unclear. When Shell offered RLNG to NTPC at $6.2 per mmbtu, the Henry Hub gas price was $10 per mmbtu.

At the current Henry Hub price of around $14 per mmbtu, Shell can easily hope to sell gas here at $8 per mmbtu.