Godrej Industries prepares to talk gas price with MGL

Vol 12, PW 5 (24 Jul 08) Midstream & Downstream

Like other gas-starved companies in Mumbai, Godrej Industries is to begin talks with gas retailer Mahanagar Gas to negotiate a free market price when new supplies begin by the year-end.

Based in the Vikhroli suburb of northwest Mumbai, Godrej is allocated 37,300 cm/d, far less than the 45,000 cm/d it needs, but still enough to make it Mumbai’s biggest industrial gas consumer. Over the past two years supplies to Godrej have been erratic, victim of an oil ministry edict that all industries in and outside the Mumbai city limits should face the same cuts in dwindling gas supplies from the Mumbai High.

“There have been times when we received just 20% of the allocation,â€‌ Godrej tells us. “There have also been times when we received 40%.

â€‌ Only in the last three months has the situation improved, with Godrej receiving 80% of its allocation. Godrej uses its gas to generate 3-MW captive power for its factory and to heat one steam boiler.

“We have two turbines, each of 1.5-MW capacity in the co-generation power station,â€‌ says Godrej. With gas supplies down, one turbine is shut down, and the boiler uses costly liquid fuel, mainly LSHS priced at (an equivalent) Rs26/cubic metre.

Despite shortages Godrej refuses to use alternatives like LPG or LNG. “MGL tells us more gas will be available by the end of the year, either as R-LNG or from (Reliance’s) D6,â€‌ adds Godrej.

This week Godrej executives are meeting MGL to understand the price of the new gas supplies. Privately, they expect it to be around Rs17 or Rs18 per cubic metre, considerably more than the Rs10.82 per cubic metre paid now.

Still, Godrej prefers gas at this price to LSHS. “Gas will always be better than LSHS,â€‌ says Godrej.

“It is cleaner, leaving very little soot in the burner. LSHS solidifies at room temperature and needs to be heated up to 105 degrees Centigrade to make it flow.

This means additional cost in electricity.â€‌ More, the high sulphur content in LSHS corrodes the boiler.