Zuari wants more R-LNG from GAIL or others

Vol 16, PW 2 (09 Aug 12) Midstream & Downstream

Zuari Industries, GAIL’s largest customer along the proposed Dabhol to Bangalore gas pipeline, should start receiving 1.1m cm/d R-LNG by October at its urea factory in Goa on the banks of the river Zuari.

Yet Zuari, part of the KK Birla Group, wants more gas from GAIL fast. “We wrote to GAIL two weeks ago asking for more gas,” confirms Zuari.

“We will also write to IndianOil, BPCL and GSPC.” Zuari anticipates it will need an additional 200,000 cm/d from the second half of 2015 by when it plans to increase its urea factory capacity by 15% to 460,000 t/y.

Zuari needs gas as feedstock to produce ammonia and urea and so it can eventually replace the naphtha it receives from IndianOil. “We signed a Gas Sales Agreement and a Gas Transmission Agreement with GAIL in 2009 and have been ready to take supplies since April 2011,” he adds.

“We’re happy we signed contracts then as we got a lower price.” Under its agreement with GAIL, Zuari must start receiving supplies by January 2013.

It will take R-LNG at the ‘ex-terminal’ rate of $10/mmbtu. Add taxes and transportation and this works out to $14/mmbtu at the factory gate, an excellent deal if you consider R-LNG currently sells at $14/mmbtu ‘ex-Dahej’.

GAIL will transport R-LNG through its 576-km Dahej to Uran to Dabhol pipeline and onwards through the 36-inch diameter, Dabhol to Bangalore pipeline. Finally, a 24-inch diameter, 500-km ‘branch’ line will carry gas the remaining distance to Zuari in Goa.

Zuari believes its gas price will be valid for five years from when supplies begin, but a GAIL source clarifies in reality the price will be valid for only one year.