Govt plans to buy entire LNG capacity from Shell

With the rise in demand for liquefied natural gas (LNG) from industries based in Gujarat, the state government has decided to purchase the entire production of the Royal Dutch/Shell Group's LNG entity, Shell Hazira Gas Pvt Ltd. Shell Hazira produces 8.5 million metric standard cubic metres (MMSCM).

The state-run Gujarat State Petroleum Corporation Ltd (GSPCL) has already initiated negotiations with Shell Hazira and a gas purchase agreement is expected to be signed soon.

"The state government, through GSPCL, has been picking up 3.05 MMSCM of LNG from PLL since PLL's Dahej terminal commenced commercial operation in February. As GSPCL has already been tied-up with various industry houses to sell 3.05 MMSCM of gas, we are looking for resourcing more LNG in near future," Saurabh Dalal, Minister of State for Energy and Petrochemicals told Business Standard.

"The government is now planning to pick up the entire 8.5 MMSCM capacity of LNG from Shell as the demand for the fuel is rising in the state. Also we may use LNG as the alternative fuel for the power plants of Gujarat Electricity Board (GEB)," he added.

At present, GSPCL buys 1.75 MMSCM of LNG from GAIL India, one of the major stakeholders of PLL. GSPCL also procures .8 MMSCM and .5 MMSCM, respectively from two other PLL's stakeholders, IOC and BPCL.

"Not only is GSPCL buying a significant amount of LNG from PLL's stakeholding companies but around 85 per cent of the total capacity of PLL's LNG terminal at Dahej in Bharuch district is being brought in through the pipeline of Gujarat State Petronet Ltd (GSPL), a wholly-owned subsidiary of GSPCL. Out of the total 8.5 MMSCM, 7.2 MMSCM of LNG is being transported through the pipeline network of GSPL. In this GAIL transports 2.31 MMSCM of LNG to its customers, IOC transports 1.5 MMSCM of LNG and BPCL is transporting .3 MMSCM of gas to the customers in Gujarat," said Dalal.

C K Koshy, chairman of GSPCL, said, "We are foreseeing tremendous potential of gas sales in Gujarat during the next 2-3 years and we may negotiate with Shell for a staggered uptake for LNG. As of today the demand from the industries is very much encouraging. We may, over a period of time, take the entire amount of LNG from Shell, depending on price and other conditions."

Shell, which expects its LNG terminal to start commercial operation by September, 2004, is believed to be negotiating with other corporates for LNG supply.

But company officials denied to reveal the identity of potential buyers. Nitin Shukla, chief executive officer of Shell Hazira group was unavailable for comments.