Shell sees no threat from Reliance east coast gas

Vol 6, PW 21 (18 Dec 02) Midstream & Downstream

SHELL IS EQUALLY dismissive of Reliance's massive gas find on the east coast and does not see it as a threat to its plans to sell LNG from Hazira to industries in Gujarat.

"We are confident that Reliance will in no way be a threat to us or for that matter to Petronet-LNG," we learn. "Demand for gas in India is so acute that almost all of Reliances gas will be used up before it reaches the Gujarat border." More, Andhra Pradesh, where Reliances gas must transit, is unlikely to approve if it is sent to other states instead of used to boost industrialisation at home.

"Chandrababu Naidu (Andhra Pradesh chief minister) will insist that demand be created in the state itself." Despite confidence that it can overcome the Reliance "threat", Shell admits it hasn't yet signed a single sales contract with customers. "Customers want to wait and watch if Reliance gas will come to western India." Petronet-LNG faces the same problem.

"Customers have stopped talking about commitments either to Shell or Petronet-LNG." We are told matters should clear up in the next four or five months. "There is a lot of expectation in the market after Reliance's claims that they can transport gas to western India.

We feel customers will wait for another four or five months before taking a decision. By then Reliance should have also come out with a marketing plan." Shell points to the determination of consortium partners BP, Petronas and IOC to proceed with the Kakinada LNG terminal project as proof that Reliance's find is no threat.

"If the Kakinada consortium sees no competition from Reliance then we are in an even stronger position."