The Hindu Business Line : Shell may not supply LNG to Maharashtra

SHELL India is unlikely to sell liquefied natural gas imported at its Hazira terminal to customers in Maharashtra. Industry sources cite delays in laying GAIL's Dahej-Uran pipeline as the reason for Shell's decision. Shell, however, "hopes that the pipeline will be in place early so that these customers (Maharashtra) can be accessed".

The company, which was in negotiations to supply LNG to fertiliser, power and steel companies in and around Maharashtra's Uran and Thane industrial area from its 2.5 million tonne Hazira LNG terminal in Gujarat, has told consumers to "not depend" on its plans. There is enough demand to absorb Shell's entire 2.5 million tonnes LNG in Gujarat itself.

It is learnt that the Petroleum Ministry has raised doubts about the viability of GAIL's 489-km Dahej-Uran pipeline that is to bring LNG into Maharashtra. The Ministry has written to GAIL raising questions about its ability to tie up enough gas supplies to fulfil its current commitments, a source said.

GAIL is already falling short in supplying to customers along the Hazira-Barauni-Jagdishpur trunk line and its Dahej-Vijaipur pipeline. It will still be short of gas even after receiving 2.5 million tonnes from Petronet LNG's Dahej terminal, the source said.

A senior GAIL India official, however, denied that the pipeline project was falling behind schedule. It is going as per our expectations, he said.

Neither GAIL nor Shell Hazira have been able to sign final LNG supply agreements in Maharashtra as most customers are fertiliser and power companies that are sensitive to high prices. They are also expecting Reliance to supply gas at cheaper rates from K-G basin.

"Shell officials met us a few days ago and told us not to depend on them. They indicated that though Shell would like to work with us we should continue our negotiations with other LNG companies," Mr S. Balan, RCF Ltd's Chairman and Managing Director, told Business Line. RCF has been negotiating with GAIL India and Shell for LNG supplies of 1 million tonnes a year. A senior official of Tata Power, which has been negotiating with Shell for supplies to its Trombay unit, also said that Shell officials did express apprehensions about delays to them.

When contacted, Mr Nitin Shukla, CEO, Shell Hazira Pvt Ltd, said: "Shell Hazira is interested to supply gas to customers in Maharashtra as well on priority and hopes that pipeline will be in place early so that these customers can be accessed."

Customers in Maharashtra are looking for "reasonable prices" and have been unwilling to sign medium and long-term agreements with LNG suppliers. Neither Shell nor GAIL has spoken about the final price of gas. Also, after NTPC announced that it would buy natural gas from Reliance at $2.97 per million British Thermal Unit (BTU) the price is now being used as a benchmark.

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