Hazira R-LNG for NTPC awaits Shell GTA with GAIL

Vol 11, PW 23 (03 Apr 08) Midstream & Downstream

Unresolved contractual issues between GAIL and Shell are blocking gas supplies to NTPC from the Shell and Total operated Hazira LNG terminal.

PETROWATCH learns Shell offered gas to NTPC for its Anta, Auraiya, Kawas and Gandhar plants (but not Dadri and Faridabad) when the last tender for 6m-7m cm/d closed on March 20. But delay in finalising a Gas Transmission Agreement (GTA) between Shell and GAIL means supplies cannot begin.

“Shell and GAIL still need to sort out some contractual issues,â€‌ confirms NTPC. “We can expect to get gas from Shell only after that.

â€‌ Contacted by this report neither GAIL nor Shell would divulge details about their GTA talks except to confirm that “commercial negotiationsâ€‌ are underway and will be finalised shortly. Whether agreement will come in time for NTPC’s latest tender for 6m-7m cm/d for the same power plants - which opened on March 28 and closed on April 2 - is another matter.

“Shell has supplied R-LNG to one or two customers on the HBJ in the past,â€‌ confirms a source. “But earlier the customer negotiated and agreed the transmission tariff with GAIL.

Under a GTA the transmission tariff will be included in Shell’s price.â€‌ According to the government’s Gas Utilisation Policy drafted in December 2007, GAIL charges customers $0.77 per mmbtu transmission tariff for subsidised ONGC gas; $0.77 for gas from the Panna, Mukta and Tapti fields; and $0.35 per mmbtu for the R-LNG it receives from Dahej.

As last time, industry response to NTPC’s latest tender is expected to be lukewarm, with only Shell and GSPC likely to bid. Lack of additional supplies from Dahej means offtakers BPCL, Indian Oil and GAIL are unlikely to respond.

“Petronet-LNG will start buying spot LNG cargoes in May when prices are expected to come down,â€‌ we hear. “Until then there won’t be any surplus gas from Dahej.