The Hindu Business Line : Shell Hazira restarts LNG biz after 5-month lull

Pricing issues
High LNG spot trading prices coupled with high winter demand had created problems for the LNG terminal.
With the softening of LNG spot prices the company has signed 2 new customers.

Mumbai , April 24

The Rs 3,000-crore, 2.5-mmtpa LNG terminal of Shell Hazira, that had gone into a state of inaction for the past five months or so, is back in business.

The LNG terminal, that had run into problems regarding procurement of LNG due to its high spot trading price, led by high winter-driven demand, has received a 1.41 lakh cu.m. parcel from Oman last week.

Sources in the Gujarat Government confirmed this development, saying that the vessel that began unloading its cargo on April 15, completed the transaction on April 18.

It was only last month that the Gujarat Maritime Board (GMB) had sent an `interim notice' to Hazira Port Pvt Ltd (HPPL), the special purpose vehicle floated by Shell to develop the Hazira port, as to why it had brought in 17 LNG parcels in its first year of operations as indicated in its detailed project report (DPR).

Talking to Business Line, Mr Marc den Hartog, Director, Shell India Pvt Ltd, said people were buying gas from Shell Hazira once again.

"There was a period when people were not buying LNG from us, largely because of lower price expectations. With the crude prices high and our prices lower than during the winter months, they are back with us. We have even signed up a couple of new customers now," Mr den Hartog said.

American benchmark

For Shell's India operations, the softening of spot market price for LNG could not have come too soon. From the reigning American benchmark price of around $15 per mmbtu in December 2005, the rates are down to around $8. Though the pricing is largely different in the Asia-Pacific region, there is some correlation with the American benchmark, which is now getting reflected on the price at which Shell has procured the Oman parcel.

Till date, Shell Hazira had received three parcels, the first two from Australia and the final one, in November 2005, from Oman. Shell Hazira had been trying to convert the users of naphtha as fuel to buy LNG from them, prominent among them being NTPC's Kawas power plant and Essar Steel.

In fact, Essar has signed temporarily with Shell, due a shortfall in supply from Petronet LNG, Dahej.

Concession pact

As per the concession agreement agreed upon between GMB and HPPL, on April 22, 2002, Shell needs to initiate development of non-LNG cargo terminals on completion of the LNG terminal.

True, Gujarat Government is cross that Shell has not submitted the final DPR till now though the port has been operational since April 2005.

The MNC hopes to revive its fortunes pointing to a saving of around Rs 130 crore as against the comparable naphtha price each time a vessel docks in Hazira.