Shell alliance with Total favourite for NTPC bid

Vol 8, PW 2 (21 Apr 04) Midstream & Downstream

NTPC wants LNG suppliers Shell, Total affiliate Yemen LNG and Petronas to quote separately from Dahej and Hazira LNG import terminals as Reliance and BG are out of the race for LNG supply.

Earlier, NTPC wanted LNG suppliers to quote separately from Petronet-LNGs Dahej terminal, Shells Hazira terminal as well as from BGs proposed Pipavav terminal and Reliances (proposed) Jamnagar terminal But matters have taken an interesting turn since Total (Yemen LNGs largest shareholder) announced the purchase of 26% equity in Shells Hazira LNG import terminal. Market observers say Shell and Yemen LNGs separate requests for extension of NTPCs price bid submission date is the result of this alliance.

They asked for extensions because they wanted to reconcile and harmonise their bids for LNG supply to NTPC, says an industry source. Maybe they want to decide whether both of them will bid or if one will stay away.

Adding weight to this theory is that only Shell and Yemen LNG sought extensions from NTPC this time. Petronas and Reliance did not.

We are told the Shell-Total agreement for 26% equity stake in Hazira binds both companies not to compete against each other. Both could enter into an arrangement where they have a friendly bidding against each other (for the NTPC tender).

An industry source offers some unsolicited advice for Shell and Yemen LNG: Both should bid in such a way that their bids are advantageous and economical at Hazira. How They should quote a slightly higher LNG CIF price at Dahej and the actual price at Hazira.

Shell and Total affiliate Yemen LNG might refrain from competing against each other for the Kawas Gandhar tender but Petronas remains a serious bidder. However, we are told, the cost of LNG from Petronas would be high compared to gas from Qatar.

Even gas from Oman (Shell and Total have equity gas here) would be costlier than from Qatar. The only country that can compete with Qatar is Iran.

But theres no LNG either from Qatar or Iran in the NTPC race. If Yemen LNG bids it could offer a competitive price because, Yemen government is a part of the project and might be keen to put across an attractive price to enter the market.