Little or no market for future Hazira LNG expansion

Vol 12, PW 11 (16 Oct 08) Midstream & Downstream

Shell and Total should think hard before expanding their Hazira LNG terminal any further, despite advice to the contrary.

“If the fundamentals of the gas market are sound then it makes sense to expand Hazira,â€‌ says an industry source. “Having a â€کsmall’ 2.5m t/y terminal is â€کOK’ but for most companies the gas business becomes interesting only when you have a 5m t/y terminal or bigger.

â€‌ Shell and Total this month moved closer to that goal after successfully â€کde-bottlenecking’ their Hazira facility enabling it to pump out 13m cm/d (3.6m t/y) instead of the average 7.2m cm/d (2m t/y) pumped out over the past 12 months. Yet any Hazira expansion depends not only on customer demand but also on gas storage – lacking in India.

“Storing gas is expensive,â€‌ adds a source. “India is not like the US where you have gigantic pipelines with huge diameters to transport as much gas as you put in them.

In India the HBJ is always full. You can’t do â€کline-packing’ (play with pressure to regulate gas flow).

There’s no flexibility in the HBJ.â€‌ Proposals by Petronet-LNG shareholder Gaz de France to promote an underground storage facility in Rajasthan using disused ONGC gasfields have gone nowhere.

“Hazira’s only option would be to build a third storage tank on site to add to the two 160,000 cubic metre capacity tanks it has already,â€‌ we hear. “Building a tank is expensive.

You need a good reason to justify a third tank.â€‌ Perhaps the biggest argument against further expansion of the Hazira terminal is the imminent arrival of D6 gas and the possible construction of another terminal in Gujarat at nearby Mundra.

By 2014, Reliance fully expects to be pumping out 115m cm/d from D6; while from Mundra you can expect 23.4m cm/d (6.5m t/y). Add another 36m cm/d from Dahej (10m t/y), 18m cm/d from Dabhol (5m t/y), 80m cm/d locally produced gas and Indian customers will soon be able to pick and choose from a total 272m cm/d available in the market – without counting 13m cm/d spot R-LNG from Hazira.