GSPC firm on ending Shell pact

Mumbai, Jan 4 | Updated: Jan 5 2006, 06:00am hrs
The future of Shells LNG business in India was further thrown into uncertainty, with the Gujarat State Petroleum Corporation (GSPC), Shells first and only customer for LNG from its Hazira project, deciding not to renew its gas sales agreement with the company.

GSPCs 7-month agreement with Shell to source 0.7 MMSCMD (a per day measure) of gas ended in December 2005, and GSPC is now refusing to renew the deal citing high prices of gas charged by Shell in its new contract.

A GSPC source said, Shell was asking almost three times higher prices over $9 per million metric British thermal units (mmbtu) for LNG, while it was supplying LNG at $3.7 mmbtu to us a per the GSA. It is not viable to source LNG at that price so there is no scope of renewing the GSA.

Admitting that Shell has at present no clients in India, Shell official spokesperson said, We have honoured the GSA with GSPC, which has come to an end. We are now in talks with a number of customers for our LNG supply. When asked about reports of Shell terminating operations at its LNG terminal at Hazira, he said, Our LNG terminal is fully operational.

GSPCs decision may cause shortage of around 7 lakh cubic meters per day of natural gas for Gujarat industries. The states gas requirement was increasing in leaps and bounds and the impact of the shortage was likely to be felt in the next few months.

However GSPC, the nodal agency for the Government of Gujarat (GoG) for distribution of LNG in the state of Gujarat, has ensured uninterrupted supply of LNG for Gujarat industries. Confirming the development, GSPCs managing director, DJ Pandian told FE, Gujarat will not face LNG shortage. GSPC will ensure uninterrupted LNG supply to Gujarat industries as per schedule. We have alternative sources of LNG supply.