The Hindu Business Line : Shell-HPCL deal on Hazira LNG drags on

What they say
Money is not the only criteria in diluting further stake in Hazira LNG. We are looking for someone like Total who can add value to the project, says Mr den Hartog, Director, Shell.
HPCL wants to enter gas business, but it need not necessarily be through LNG route. We are not sure when the deal with Shell will come through, says Mr M.B. Lal, HPCL CMD.

Mumbai , March 27

Close to two years have gone by after Hindustan Petroleum Corporation Ltd engaged the Indian arm of Royal Dutch Shell in talks for picking up equity stake in the Hazira LNG terminal.

Mr Marc den Hartog, Director, Shell India Pvt Ltd, admits that it has been a while since the HPCL deal has been in the making, pointing out that it took over two years (2003-05) to clinch the Total (France) deal.

Talking to Business Line, Mr den Hartog is categoric that Shell has no issue about its stake dipping below 50 per cent (it would become 48 per cent in case of 26 per cent stake sale to HPCL, another 26 per cent being with Total).

"Money is not the only criteria in diluting further stake in Hazira LNG. We are looking for someone like Total who can add value to the project.

"We are looking for parallel development on the port front, where the idea is to bring a company into full-fledged port handling.

"We need to comply with the terms of concession agreement with the Gujarat Government, wherein bulk cargo and other terminal have to get built," says Mr den Hartog.

Mr M.B. Lal, Chairman and Managing Director, HPCL, is non-committal when asked about the status of the deal that has been in the making for nearly two years.

"We want to take to a long-term view on this. Certainly, there are benefits, but it also requires heavy investments. HPCL wants to enter gas business, but it need not necessarily be through LNG route. We are not sure when the deal with Shell will come through," he says.

Switching from naphtha

Having opted for the short-term contract route unlike the nearby Dahej terminal of Petronet LNG that managed to enter a long-term contract for gas from Ras Gas, Qatar at around $4 per mmbtu, Shell can only hope to convert naphtha users.

True, the reigning rates of $9-10 per mmbtu is way below that of naphtha where the comparable cost is around $15, but there is always that inevitable comparison to Petronet LNG.

"What we are trying to tell the likes of NTPC is that even if they buy from us, it would mean significant savings in the form of power cost as against when using naphtha as fuel," says Mr den Hartog. Shell's argument is that the unit of Kawas, located close to its Hazira terminal, can produce power at below Rs 5 per unit as against Rs 7 now, if it were to make the switch in fuel.

According to him, if Shell were to meet fuel requirement at Kawas, it would need to bring one cargo of 1,30,000 cu.m. every two months. Clearly, a futuristic projection as Shell still needs to sell a bulk of the last parcel that it received at Hazira in November 2005.