Reliance, BP set to kick off imported LNG marketing

In talks with Shell, Petronet LNG to book capacity

Faced with a shortfall in gas production from its KG-D6 field, Reliance Industries Ltd (RIL) is set to make its debut in the marketing of imported natural gas. India Gas Solutions, the equal joint venture between RIL and British Petroleum (BP) set up to source and market natural gas in India, will shortly bring in liquefied natural gas (LNG) through the terminals of Shell India and Petronet LNG.

Company executives said RIL was in talks to book capacity at Shell Hazira Gas Private Ltd, a joint venture between Anglo-Dutch energy company Shell and France’s Total, and Petronet LNG’s Dahej terminal. “We are in talks with various LNG terminal operators to book exclusive capacity at the existing LNG terminals. We want to get capacity and bring in gas to market. We would be paying them toll charges,” said an RIL executive. An RIL spokesperson declined comment. The booked capacity at these terminals could be anywhere between two and three million tonnes per annum, depending on what the terminals will have on offer.

India currently has two LNG terminals, both in Gujarat, that have been bringing in LNG from across the world. Though Shell has been offering capacity at the terminal on a merchant basis, PLL promoters so far market regasified LNG themselves.

An executive from Shell Hazira said, “The company is in talks with various players for regasified LNG.” At present, Hazira Terminal operates at an annual capacity of 3.6 million tonnes. Petronet’s Dahej terminal can handle up to 11.5 million tonnes of LNG.

Petronet is owned by state-controlled Oil and Natural Gas Corporation, Indian Oil Corporation, Bharat Petroleum Corporation and GAIL India (each with 12.5 per cent stake) in addition to France’s GDF Suez, with 10 per cent interest, the Asian Development Bank with 5.2 per cent and public shareholders with the remaining 34.8 per cent.

RIL and BP had last November set up India Gas Solutions as part of an agreement reached in February whereby BP picked up 30 per cent stake in 23 oil and gas blocks of RIL, including the flagship KG-D6 gas fields.

A BP spokesperson said, "India Gas Solutions Pvt Ltd is in the process of drawing up its business plan and it is too premature to comment on the plans. We will share details at an appropriate time once finalised."

According to data available from Platts till March 2012, RIL has been buying an average of one or two cargoes every month since April 2011 for use at its refinery and petrochemicals units.

RIL gets around 10 million standard cubic metres of regasified LNG per day for captive use at its Jamnagar refineries.

The company said that after a formal arrangement with Shell Hazira or Petronet LNG, it may or may not continue to import that quantity. An official said given that India Gas Solutions is an entity independent of RIL and BP, RIL may even look at buying gas from it if it found the same cheaper than what it had been importing. The absence of new gas finds and declining production from the KG-D6 field have made the business of importing gas attractive for industry players.

The interest of these companies in LNG import is evident from the fact that India had, till January 2012, registered an 89.5 per cent increase in LNG import.

January LNG imports, term and spot, stood around 1.45 million tonnes, of which 16 cargoes representing just over one million tonnes of LNG were delivered to Petronet LNG Limited’s terminal at Dahej in Gujarat. Hazira LNG Private Ltd’s terminal at Hazira in Gujarat received a total of five cargoes with around 446,000 tonnes of LNG in January, according to Platts.

“The demand for gas has been growing at an exponential rate and we anticipate natural gas to emerge as the preferred choice of fuel given its properties as a cleaner and sustainable fuel source,” BP India head Sashi Mukundan had said.