Indian Oil signs R-LNG supply deal with KRIBHCO

Vol 9, PW 20 (26 Jan 06) Midstream & Downstream

State-owned fertiliser producer KRIBHCO has signed a gas supply agreement with Indian Oil for the supply of 200,000 cm/d of regassified LNG from Dahej.

PETROWATCH learns first supplies began arriving at KRIBHCO's fertiliser plant at Hazira in the second week of January. KRIBHCO is paying IOC approximately $3 per mmbtu (gross calorific value) and the contract is on a 'fallback' basis, i.

e. where the Indian refiner is only obliged to supply if it has gas available.

In addition to the base price of $3 per mmbtu, KRIBHCO is paying IOC an additional Rs58 per mmbtu, plus sales and entry taxes. KRIBHCO's agreement with IOC follows GAIL's refusal to renew its contract for the supply of 700,000 cm/d R-LNG when it expired on 31st December.

GAIL, it seems, refused to renew its contract for R-LNG with KRIBHCO because it sees more lucrative opportunities elsewhere. Selling gas to power and fertiliser companies won't boost GAIL's bottom line, a source tells us.

GAIL prefers selling gas to petrochemical plants. KRIBHCO was paying GAIL approximately $5 per mmbtu, including taxes and other levies.

Much of the contracted quantity from GAIL was not used and the state owned fertiliser company hopes to use the balance over the next three months. After that, KRIBHCO might be forced to use naphtha to offset gas supply shortages resulting from GAILs decision not to renew its contract.

KRIBHCO will need higher quantities of gas when it commissions a new 1850 tonnes per day ammonia plant and new 3250 tonnes per day urea plant at its existing facility in Hazira. It will be a greenfield plant that runs on gas, we hear.

We produce the cheapest urea in the country and can set up a plant using our existing infrastructure facility to save costs. KRIBHCO estimates its new plant at Hazira will take three years to construct after the contract is awarded and cost about Rs1750cr.

KRIBHCO is also optimistic about sourcing gas from Reliance. We signed a MoU with Reliance a few years back, he adds.

When our new plant is ready we hope to convert it into a contract.