Date:28/05/2005 URL: http://www.thehindubusinessline.com/2005/05/28/stories/2005052802230200.htm

Back Shell Hazira willing to wait and watch

Gaurav Raghuvanshi

Hazira , May 26

WHO bats the eyelid first? That seems to sum up the situation at the new LNG terminal set up at Hazira by Royal Dutch Shell and Total Gaz Electricite Holdings of France.

The terminal, set up at a cost of Rs 3,000 crore, was inaugurated on April 21 when the first LNG ship sailed in from Australia.

The company has managed to take on board one client, Gujarat State Petroleum Corporation (GSPC), to which it is supplying 15-30 million BTUs (British thermal units) gas daily.

That, however, represents a miniscule portion of the current installed capacity of 2.5 million metric tonnes per annum (MTPA), which is slated to go up to 10 MTPA once demand for gas - at what Shell claims to be "realistic prices" - picks up.

The throughput capacity can be increased to five MTPA with minimal investment.

The LNG terminal, which is still in the process of settling down, has received only one consignment so far and the second vessel is expected to come in from the Gulf region in the second half of June, company officials told Business Line.

"We started the terminal to demonstrate our commitment to the business. We are in it for the long haul. We are willing to let the plant idle and wait for such time that customers and the Government come to terms with the international gas pricing realities and realise that they have to pay market prices," a senior Shell official said.

The official described the situation as akin to the promise of free power to farmers. "The power is free, but it is simply not available most of the time and in other times, the quality is so poor that it is actually bad for the water pumps."

Gradually, it is being realised that if farmers need quality power in the required quantity, they need to pay a price.

Although officials at the Hazira terminal refused to disclose at what price Shell was sourcing gas and at what price it was being supplied to GSPC, industry observers believe that Shell is selling the gas at a loss as of now.

"We do not discuss pricing," was all that the company spokesperson said.

Mr Yves Boiraud, Terminal Manager at Hazira, told visiting newspersons that the second consignment of LNG was expected in the second half of June.

He added that the company was regularly supplying gas to GSPC at Mora, 17 km from the terminal.

"The terminal can handle about 300 vessels in a year and has been built on the plus one principle. For every requirement, we have one extra, whether it is regassification facilities or power generation equipment," Mr Boiraud said.