Fertiliser company KRIBHCO looking for more gas

Vol 9, PW 17 (01 Dec 05) Midstream & Downstream

Fertiliser producer Krishak Bharati Cooperative (KRIBHCO) is ready to switch to expensive naphtha next year if GAIL is unable to renew its contract for the purchase of regassified LNG from Dahej.

KRIBHCO tells this report it produces the cheapest urea in the country at its Gujarat-based plant in Surat but that if it is forced to switch part or all of its production to naphtha from gas the price will increase significantly. On average it costs Rs5, 000 to make a tonne of urea using gas but a staggering Rs15, 000 per tonnes using naphtha.

Faced with dwindling supplies of subsidised domestic gas and limited supplies of R-LNG, KRIBHCOs predicament is shared by fertiliser companies across India. Look at the numbers.

GAIL supplies KRIBHCO with 700,000 cm/d of R-LNG, but is unsure if it can maintain this level when the contract expires. In 1981, the two companies signed an agreement for the supply of 3m cm/d of subsidised domestic gas sold under the Administered Pricing Mechanism but today GAIL supplies less than 2m cm/d, forcing KRIBHCO to look elsewhere.

Additional supplies of between 400,000 cm/d to 600,000 cm/d come from the Panna, Mukta and Tapti fields offshore Mumbai while GSPC and Bharat Petroleum supply KRIBHCO with another 3m cm/d each. Lack of gas has hit KRIBHCOs expansion plans.

Its Surat complex produces two ammonia streams of 1520 tonnes a day and four urea streams of 1310 tonnes per day. But plans to produce an additional 3200 tonnes a day of urea are hostage to its ability to procure additional supplies of 2m cm/d.

KRIBHCO was originally hoping it could secure some of Reliances KG gas after 2008 as its Surat plant is near NTPCs Kawas power plant one of two that Reliance is meant to supply. But Reliances agreement with NTPC is in doubt and KRIBHCO is looking for alternatives and talking to ONGC for more Panna, Mukta and Tapti gas.

It has also signed a Heads of Agreement with Indian Oil for 2m cm/d regassified LNG and another HOA with GAIL for the same amount.