ONGC eyes stake in Shell Hazira

Oil and Natural Gas Corporation (ONGC) will soon make an offer for a complete buyout of the Hazira LNG terminal of Royal Dutchhell.

ONGC has already initiated a due diligence of the assets of Shell Hazira Gas Pvt Ltd (apart from Shell, Total of France holds a 26 per cent stake in the company).

Unlike Hindustan Petroleum Corporation , which is interested in picking up 26 per cent equity in Shell Hazira, ONGC is mulling a total buyout of the LNG import and regasification terminal. "We are interested in 100 per cent equity of the project," a senior ONGC official said.

Shell has been looking to sell a part of the company's equity to an Indian or overseas energy company. "Shell is open to any such offer for a stake in the project," Marc Den Hartog, director, Shell India, had told Business Standard earlier in the month.

Shell Hazira is finding it difficult to market LNG in India at the prevailing global prices. Its sole customer, Gujarat State Petronet Corporation, lifts LNG as and when there is demand from the customers in the state.

In the absence of long-term supply agreements with Indian consumers, Shell Hazira is in a fix. It picks up floating cargoes of LNG and brings the same to the Hazira terminal for sale at prevailing global LNG prices. This makes it difficult for Shell to reduce its offer price to Indian buyers.

On the other hand, Petronet LNG, a consortium of public sector companies importing LNG through Dahej terminal, has a long-term supply arrangement with RasGas of Qatar, which provides it with much required flexibility of entering into long-term sales agreements with the buyers. Also, it makes sense for ONGC to have a LNG terminal of its own.

The company has a long list of clients, which use natural gas produced from Bombay offshore and Gandhar gas reserves.

Gandhar gas reserves have been depleting fast and have been partially replaced by the LNG supplied by Petronet LNG Dahej terminal through the GSPC pipeline network and the Hazira Bijapur Jagdishpur pipeline.