Bharat Petroleum cancels Shell spot cargoes

Vol 20, PW 24 (24 Aug 17) Midstream & Downstream

Bharat Petroleum's lack of experience in the LNG import business is showing after it made a major miscalculation over a deal with Shell to take three spot cargoes.

After cancelling two deliveries early this year, last month (July) BPCL cancelled delivery of the third and the last cargo promised under a 12.5% Brent-linked deal signed with Shell towards the end of 2016. "BPCL has not brought in any spot cargoes for six months," we hear.

BPCL sourced its last cargo from China's Sinopec and landed it at Kochi on February 24 this year (2017). "BPCL miscalculated R-LNG demand from its customers," says a senior LNG industry source.

"Such cancellations are not good for its reputation." Essar, one of BPCL's major R-LNG customers, has since October 2016 started importing its own LNG, with seven cargoes coming till date and the last 140,076-cubic metre delivery arriving at Dahej on August 8. Another major BPCL customer was the General Motors car factory at Halol in central Gujarat which shut down in April 2017.

BPCL's desperation can be seen from its readiness to pay diversion charges for the three cargoes to Shell where it agrees to bear the costs of transporting the cargoes from any liquefaction plant worldwide to any destination. "This is very unusual," says an LNG industry source.

"At $36,000/day LNG spot shipping charges are low. But BPCL will still lose a considerable amount."