GAIL might use Hazira for future LNG cargoes

Vol 10, PW 3 (01 Jun 06) Midstream & Downstream

There are no permanent enemies in politics or business.

In the early days, GAIL never tired of taking pot shots at rival Shells plans to construct a LNG terminal at Hazira to compete with Petronet-LNGs terminal at Dahej, where GAIL owns 12.5%. But now GAIL is getting ready to do business with Shell in a big way.

Not only is it talking to Shell to bring in future LNG cargoes at the Hazira terminal, it is also looking to buy LNG from Shell. GAIL is hoping to connect Hazira with the HBJ pipeline by end-July to facilitate the transport of its regassified LNG from the terminal.

GAIL has two options: to transmit the gas to the Mora facility of Gujarat State Petronet or join its HBJ to a tap-off left by Shell near Suvali. Antipathy towards GAIL at Gujarat Petronet probably means GAIL may finally have to connect near Suvali into Shells tap-off pipeline.

Shell has a 28-inch tap off point and sources say GAIL would most probably lay its own 28-inch pipeline. As for the deadline of July, GAIL chairman Proshanto Banerjee is confident it can be met.

But local experts believe GAIL would find it difficult to get RoU (Right of User) permission in time. Not only are there a number of gas pipelines criss-crossing the area already, Reliance Industries has ownership of large tracts of land in the region.

GAIL would have to convince Reliance to allow it to lay its pipeline. As for Shell, it has wanted to access the HBJ for long and would welcome GAIL with open arms.

Shell is struggling to utilise its 2.5m t/y facility to full capacity and had to suspend operations for over three months and could only restart work only on 15th April with the arrival of a cargo, which it sold to GSPC and Essar Steel at $10.50 per mmbtu delivered price. Shell has two LNG storage tanks and has been finding it difficult to fill them.

In the past it has made clear that it would allow its port to be used for charter and provide open access. Connection to GAILs HBJ pipeline would provide a new market for its LNG.

Next year, GAIL hopes to lay a pipeline from Dahej to Dabhol in Maharashtra. This would help it increase its all-India sale of gas presently at 80m cm/d and also provide another market for the LNG it buys from Shell.