Progress on GAILآ’s coal to gas plan with Shellآ’s help

Vol 9, PW 19 (12 Jan 06) Midstream & Downstream

Significant progress is reported on GAILs project to produce gas from coal using proprietary technology from Shell.

PETROWATCH learns in late November that GAIL received a draft feasibility report from German consultant Uhde. Soon after, we hear an Uhde team delivered a detailed presentation on the report to GAIL in the presence of an executive from Shells Singapore office.

GAIL is in broad agreement with the Uhde report, which talks of producing 6m cm/d from 4000 tonnes of coal. The quantity of coal to be used is large because of the relatively high ash content of up to 40% found in Indian coal.

Uhde suggests coal of grades E and F could be used for the project. However, GAIL and Uhde disagree on one key issue: price.

Uhde believes the price of gas will be around $4.9 per mmbtu. GAIL finds this excessive and believes the gas should be priced between $4 and $4.5 per mmbtu if it is to win acceptance in the market.

If the price is not affordable to customers the project will not be commercially viable, says an industry source. GAIL believes the price can be brought down by changing certain design parameters.

GAIL stressed this point during the Uhde presentation. Shells representative heard out GAIL and did not raise any objection, we hear.

Uhde will submit a revised report incorporating GAILs suggestions and hopefully, a lower price, sometime this month. Luckily, disagreement on the gas price has not dimmed GAILs enthusiasm for the project.

We hear GAIL is keen to set up a coal to gas project to supply gas-starved fertiliser factories unwilling to pay the significantly higher price for regassified LNG. Last month, a GAIL-led team of representatives from Shell, Uhde and state-owned fertiliser consultancy Projects and Development India Ltd made a presentation to the fertiliser ministry.

The fertiliser ministry wants a pilot project to be set up either at Durgapur or Talcher, we hear. At both places the fertiliser ministry already has some infrastructure such as conveyor belts and water supply.

But the location has yet to be frozen.