Only a few buyers in India for Shellآ’s آ‘costlyآ’ LNG

Vol 10, PW 1 (04 May 06) Midstream & Downstream

After a long spell of silence the Hazira LNG terminal is once again buzzing with activity.

But very few customers appear willing to pay the price Shell and Total are asking. Opinion in Gujarat is divided on whether Shell and Total can sustain the price of $9.07 per mmbtu they are charging both companies for R-LNG at the downstream flange.

For now only Essar and GSPC appear ready to pay at this price, with GSPC believed to have snapped up 60% and Essar 40% of the cargoes. This price is not sustainable, says one industry source.

It is supported only by the panic buying of GEB to meet the current power shortage. Interestingly, the one company youd expect to be ready to pay market rates, British Gas subsidiary Gujarat Gas, is not a customer for R-LNG from Hazira.

BG believes the present Hazira R-LNG price is, purely circumstantial. Says a source: One of the Petronet-LNG tankers had gone for dry-docking and there was a temporary shortage in the market.

LNG from Hazira was only meeting this shortage. Essar, for example, has a long-term contract with Petronet-LNG for Dahej LNG and is believed to be under pressure to meet big export orders for steel.

It is also commissioning a new module in its steel mill. Petronet-LNG told all its customers well in advance that one tanker was going to dry dock.

Everybody had to make arrangements to find an alternative. Other than GEB and Essar, a small quantity of Hazira R-LNG is also believed to be going to KRIBHCO.

We are told that, generally, the price being paid in Gujarat by gas aggregators to suppliers ranges between $4.2 and $4.5 per mmbtu. Another view is that with GAIL also paying similar FOB prices for the LNG it is importing, it means there are buyers in India for gas at this price.

Adds this source: You can call it a new beginning with a new price. People were not respecting India as a buyer till now.

R-LNG from Hazira at current prices may not find a lot of buyers but it will certainly meet the requirements of some customers who want to stop using costlier naphtha.