NTPC finally relents and buys R-LNG from Shell

Vol 10, PW 4 (15 Jun 06) People & Policy

Shell has been patient with its LNG operation in India and is now reaping good returns on its oft-dubbed dead investment at Hazira.

Not long ago, Shell was forced to suspend operations at Hazira for almost three months for want of LNG buyers. But today it has the biggest potential buyer of natural gas in India knocking at its door: National Thermal Power Corporation (NTPC).

And that too at a price NTPC once dubbed atrocious and which once and for all - ends its absurd dream of buying LNG at less than $3/mmbtu! PETROWATCH learns NTPC has struck a deal with Shell to buy LNG at a price of around $10.30/mmbtu. NTPC are tough negotiators, we hear.

They achieved some advantageous terms from the bidders. In its Letter of Intent, NTPC asks Shell to deliver three cargoes over five months beginning 1st June, equivalent to 700,000cm/d.

First supplies actually began two days later on (Saturday) 3rd June because of early rains. Shell began supplying NTPC from existing LNG stock at its Hazira terminal.

NTPC issued its LoI to Shell subsidiary Hazira LNG Pvt Ltd for LNG for its 645-MW power station at Kawas. Until now, NTPC has been the staunchest critic of high LNG prices and stubbornly refused to contemplate anything above $3/mmbtu, preferring instead to generate power at Kawas using costlier naphtha selling at between $18-$20/mmbtu.

But on 25th May, better sense prevailed, and NTPC floated a tender for the supply of LNG to its power plants. Shell beat GAIL, which offered a price of $11.23/mmbtu, and also beat GSPC, which buys LNG from Shell and sells on to customers.

Still, GSPC won the contract to supply LNG to NTPCs 648-MW Gandhar plant at $10.25/mmbtu for 135,000 cm/d. GAIL lost this tender to Shell but it still holds the key to Shells ambition to sell LNG to customers outside Gujarat through its control of the countrys gas artery: the 4600-km Hazira-Bijaipur-Jagdishpur pipeline.

Shell wants to supply other customers on the HBJ but cant do so unless it has GAILs permission.