Shell talking to GAIL about 13-km pipeline to Dahej

Vol 9, PW 21 (09 Feb 06) Midstream & Downstream

GAIL is set to sign an agreement with Shell to connect the Hazira LNG terminal with its Dahej to Uran pipeline a move that would allow the state-owned gas transmission company to use the Hazira terminal on a tolling basis for imported shipments of LNG.

No date for the agreement is yet clear, but GAIL sources tells us it should be signed shortly. Under consideration is a 13-km pipeline linking the Hazira LNG terminal to Dahej that would enable GAIL to supply industrial customers in Maharashtra with regassified LNG pumped through its proposed 475-km Dahej to Uran pipeline being constructed at a cost of Rs 1,830cr ($415m).

Shell confirms that a pipeline route with GAIL is planned but refuses to disclose more information. Its too premature to talk about the ownership of the pipeline, says Shell.

Or the arrangement with GAIL. However, Shell confirms that the proposed 13-km pipeline would be completed within 16 to 18 months from the date of any agreement.

Both GAIL and Shell stand to benefit enormously if such a pipeline were to materialise. Any pipeline to Dahej would greatly reduce Shells dependence on the gas grid owned by Gujarat State Petroleum - its only customer for regassified LNG from Hazira and open up markets in Maharashtra.

Also, it would link Shells Hazira LNG plant with the Dahej LNG plant owned by rival Petronet-LNG. More, Dahej is linked to GAILs 4,600-km HBJ transmission network (commonly known as Indias gas artery) that cuts across huge swathes of northern India and supplies the national capital Delhi.

At very little cost, GAIL could potentially begin transmitting LNG from Hazira to hungry customers along the HBJ. So too could Shell, if GAIL lets it.

Most significantly, Shell will offer its loss-making terminal to third parties for the first time. Shell has never hidden the fact that it is ready to offer its Hazira facility as a merchant terminal and GAIL appears ready to take up the offer.

Shell has agreed to allow GAILs spot cargos to liquefy and store at Hazira for a tolling charge, we hear.