Why some ceramics producers think LNG is cheap fuel

Vol 11, PW 24 (17 Apr 08) Midstream & Downstream

Maharashtra-based H&R Johnson, the country’s largest ceramics producer, made history of sorts on April 12 when IOC’s pioneering pilot project to supply LNG by road was formally inaugurated at Johnson’s sprawling factory at Pen, 100-km south of Mumbai on the highway to Goa.

Johnson executives went all out to make the event a success, but could do little to help guests sweating it out under a white marquee in summer heat of 40 degrees centigrade! IOC chairman Sarthak Behuria said the event, “in the quaint town of Penâ€‌, reflects the “growing replacement of traditional fuelsâ€‌ by gas. “LNG is clean, environmentally benign and a preferred fuel,â€‌ said Behuria.

Johnson managing director Vijay Aggarwal said LNG (by road) had helped the company re-start one of its dormant production units. Hungry for gas, Johnson executives told this report the company receives between 14 to 42 tonnes of LNG a day by road from IOC but would buy happily buy more, if it could.

“We can take whatever IOC makes available,â€‌ says one. Look at the numbers to see why.

Johnson has an oil ministry â€کallocation’ of 22,000 cm/d gas from ONGC that it receives through a GAIL pipeline and for which it pays a derisory Rs13 per kg. “This meets only 20% of our gas requirement,â€‌ says Aggarwal.

Though cheap, supplies are erratic and wholly inadequate for a company that recorded sales growth of 10% to Rs1030cr ($250m) in the year to March 2008. Johnson expects this growth to continue, as it focuses on emerging markets in India’s towns and small cities.

In the absence of either LNG or domestic gas, Johnson buys LPG from IOC and also generates its own gas from coal – neither a satisfactory solution. Although cheap, coal has a heating value of only 450 kilocalories; LPG yields an equivalent 11,500 kilocalories; and LNG yields 9500 kilocalories.

But with ONGC gas running out, and coal inefficient, Johnson is left to choose between LPG and LNG. At Rs44 per kilo for LPG and Rs26 per kilo for LNG, it’s not difficult to see which fuel Johnson prefers – if only more were available.