Shell ready to start pumping R-LNG to Maharashtra

Vol 11, PW 6 (26 Jul 07) Midstream & Downstream

Shell hopes to begin selling R-LNG from Hazira to gas customers in Maharashtra by August or September this year.

Though small, the initial quantities of around 1m cm/d delivered through the newly-laid trunk pipeline from Dahej to Uran and Dabhol are hugely significant given Shell’s longstanding ambition to break out of Gujarat – its traditional market - and deliver R-LNG to steel, power and fertiliser plants in India’s most industrialised state. PETROWATCH learns Shell is close to signing a Gas Supply Agreement with one customer in Maharashtra and negotiations “are at an advanced stageâ€‌ with several others.

Advanced talks are also underway with GAIL to finalise a transmission tariff. Outside Gujarat Shell counts around 20 companies as potential buyers of its R-LNG, of which “six or sevenâ€‌ are in Maharashtra.

Typical of the sort of customer Shell would target is Rashtriya Chemicals & Fertilisers, ISPAT and the Uran power plant operated by MSEB. Until now, most of Shell’s customers outside Gujarat have been along the HBJ.

Not for much longer, as customers in Maharashtra, buoyed by this month’s commissioning of the 577-km two-way flow gas pipeline from Dahej, begin approaching Shell for supplies so they can switch from naphtha to gas. “GAIL’s new pipeline to Dabhol is very important for Shell,â€‌ says an industry analyst.

“As an R-LNG supplier Shell naturally wants to be on every piece of the (gas pipeline) network.â€‌ Shell believes it has enough capacity to supply up to 50% of the immediate gas shortfall in Maharashtra, tentatively assumed to be around 6m to 8m cm/d.

Hazira receives on average two LNG cargoes a month, around 75% of the terminal’s 2.5m t/y capacity. Only one potential obstacle lies in the way of Shell’s ambition: GAIL’s lethargy in laying spur pipelines linking Maharashtra’s industrial users to the trunk pipeline, so-called â€کlast mile syndrome’.

“GAIL says most of these spur lines will be laid by the end of the year,â€‌ we hear.