Confident of beating Shell in race to secure customers

Vol 6, PW 16 (09 Oct 02) Midstream & Downstream

BHARAT PETROLEUM, INDIAN Oil and GAIL are not blind to the fact that Shell - with its LNG terminal at Hazira - is its most powerful competitor.

Yet they believe they have two main advantages over Shell or Reliance or British Gas, who also have LNG plans for Gujarat. First - Dahej will be the first to see LNG land in India, giving it a crucial time advantage in a market with a huge unsatisfied demand.

"Where will the competition be" reveals a source. "Once our customers see that we are ready before anyone else and that we have gas available before anybody else things will be easier.

We still have more than a year to tie up customers before LNG lands. Most of the marketing work we are doing now is customer education." Second - BPCL, GAIL and Indian Oil have agreed not to undercut each others price and jointly market their gas.

"The price of LNG will be the same from each of us. We won't be competing with each other." What will be the duration of the sales contracts offered to customers "Some of them will sign for five years, some for 10 years.

We need comfort till our debts are paid. For that 10 years is enough." Each company will invoice customers separately for the gas and not through a joint venture or through Petronet-LNG.

"Selling through a joint venture will attract another layer of tax," we learn. "We know how much we can sell and in what ratio so it won't be hard to invoice separately and save tax for the customer."