Operators plan to invest Rs 450 crore in expansion.
Shell and Total, operators of the liquefied natural gas (LNG) terminal at Hazira in Gujarat, have decided to increase its annual capacity to five million tonnes, up from the present 3.6 mt, by 2013.
This follows a nearly 17 per cent fall in output from the Krishna-Godavari basin’s D6 field’s production. It has led to an increased demand for spot LNG production.
Output from the field, managed by Reliance Industries, was 46.6 mscmd (million standard cubic metres per day) in the first half of 2011-12, from 55.9 mscmd in 2010-11
Said a Shell executive, who asked not to be named, on the expansion plan: “This decision is based on market requirement and, consequently, we have decided to expand. In any case, this terminal was for five mt capacity. So, it is a very logical step.”
Shell and Total, according to the executive, would invest around Rs 450 crore for this. The terminal began with a capacity of 2.5 mt a year and was expanded to 3.6 mt after Shell completed ‘de-bottlenecking’ in December 2008. Shell uses its Hazira terminal exclusively for regasifying spot LNG, as part of a global business strategy.
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“We supply to various customers. As the economy grows, it makes sense for people to use gas as compared to any other fuel. As new pipelines are being laid, there will be continued requirement for gas as fuel,” the official added.
According to a recent report by Icra rating services, India's natural gas supply was adversely impacted in 2011-12 due to the KG-D6 fall. “Overall, domestic natural gas supplies may increase to around 153 mscmd by 2014-15 from 143 mscmd in 2010-11. The current estimate is about 22 per cent lower than our previous estimates of 195 mscmd, primarily due to lower KG-D6 production and delays anticipated in commissioning of KG satellite fields. KG-D6 production is likely to remain at subdued levels over the next couple of years, especially in comparison to the earlier anticipated production of 60-80 mscmd,” the report said.
“Due to low domestic supply of natural gas, we can see an increase in consumption of R-LNG (regasified LNG). Though R-LNG is costlier than domestic gas, it is still economical when compared to liquid fuels such as naphtha," said a Mumbai-based analyst from a broking firm.
The landed cost of imported LNG in the spot market has more than doubled in the past year to around $17-18 (around Rs 1,000) per million British thermal unit (mBtu). For a little over seven years, India has been using R-LNG and has two operational terminals at Dahej (also in Gujarat), operated by Petronet LNG, and Hazira. India imports around 50 mscmd of LNG through these terminals.