Gujarat Gas to sell CNG to Ispat Group in Maharashtra

Vol 10, PW 14 (02 Nov 06) Midstream & Downstream

Gujarat Gas has agreed to sell CNG to a steel factory belonging to the Ispat Group.

Nothing unusual in that, you might think. Industrial consumers in India always receive less than their contracted supplies of gas from GAIL and are forever on the lookout to make up the deficit with alternative supplies.

But this deal is unusual in two respects. One, Gujarat Gas traditionally supplies only to customers in Gujarat while the Ispat factory is several hundred kilometres to the south, in neighbouring Maharashtra.

Two, supplies will be by road, unlike the preferred route of pipelines, normally used to transport gas over such a long distance. An industry source tells us Gujarat Gas will begin trial supplies of CNG from next month (December) to the Ispat Groups factory at Dolvi, where it will be used to manufacture sponge iron.

Initial supplies will be whatever CNG Gujarat Gas can spare, we learn. But it could eventually go up to 50,000 cm/d.

Gujarat Gas will supply Ispat with CNG from Surat from where it will be transported in long cylinders stacked on to the back of a truck to Dolvi, more than 300-km to the south. For supplies to reach Ispats target of 50,000 cm/d, Gujarat Gas will need to despatch eight truckloads of CNG every day from Surat.

Gujarat Gas will charge Ispat the market price (Rs22/kg) at which it sells the CNG in Gujarat, we learn. No one doubts that the price is rather high but Ispat has no choice, constrained by lack of gas to fire its plant.

Still, both Ispat and Gujarat Gas are clear that trucking CNG hundreds of kilometres is only a temporary arrangement until GAILs proposed gas pipeline from Dahej and Hazira to Uran is operational. Once the pipeline is laid supplies by road will stop, we hear.

It is very costly. Agreement between Ispat and Gujarat Gas was held up because of anxiety over how Gujarat authorities would view the sale of CNG to customers outside the state.

Unresolved taxation issues over the supply of gas from one state to another were also a problem.