Distance doesn't matter when supplying LNG by tanker

Vol 11, PW 8 (23 Aug 07) Midstream & Downstream

Indian Oil believes transporting LNG by road tanker is the best way to supply customers who are not connected by pipelines or far removed from a gas pipeline network.

Other than Schott Glass in Gujarat, IOC is also supplying LNG by road to Indo-British ceramics and tile production joint venture H&R Johnson, located in a town called Pen in Maharashtra, and one of the largest tile manufacturers in the country. Schott Glass is only 70-km away from Dahej but H&R Johnson, 77.78% owned by Mumbai businessman Rajan Raheja, is about 500-km away.

“IOC made a conscious decision to choose one nearby customer and one distant customer,â€‌ we hear. “It wants to demonstrate that distance is not a problem in supplying LNG by road.

â€‌ H&R Johnson took delivery of its first batch of LNG by tanker on August 21st. Like with Schott Glass, IOC is confident this arrangement will work out well.

IOC has bought five LNG tanker trucks as part of its initial investment, which also includes setting up small LNG storage tanks at the premises of the two customers. One tanker is dedicated to supplying Schott Glass and four will supply H&R Johnson.

Formal contracts will be signed after both customers receive 30 days of uninterrupted LNG supply. IOC intends to supply 30 tonnes per day of LNG to both customers for a three-year period, which can be extended by mutual consent.

“Both customers are willing to accept any quantity of LNG,â€‌ we hear. “They both face an acute shortage of gas supplies.

â€‌ The main constraint, says an observer, is that Petronet-LNG can spare only 50 tonnes per day LNG for supply by road tankers. But this quantity is likely to increase when more LNG comes to Dahej, either from spot cargoes or term contracts.

IOC is unwilling to disclose how much it charges for LNG by road but one observer reckons it, “is about $5 cheaper than (current) naphtha prices of around $17/mmbtu.â€‌ Market sources tell us Schott is receiving delivered LNG at about $7/mmbtu while H&R Johnson is receiving it at around $8/mmbtu.