Shell to expand Hazira terminal to 10 mtpa

Shell and Total, operators of a liquefied natural gas (LNG) terminal at Hazira in Gujarat, have decided to take the terminal's annual capacity to 10 million tonnes per annum (mtpa).

The terminal at present operates at a capacity of 3.6 million tonne (mt). By 2013, this would be expanded to five mt. “With new gas pipelines being laid and LNG consumption in the country on an increase, more gas would be required. To meet the market requirement for future we intend to increase the terminal's capacity to 10 mtpa,” a senior company executive told Business Standard on condition of anonymity.

 

Going up from an annual capacity of five mt to 10 mt may cost the company Rs 4,000 crore, depending on the technology employed for re-gasifying LNG.

“There are various options we are considering. The cost not only depends on how many tanks would be put up, but also on the kind of technology we would bring in for re-gasifying,” the executive said.

The company has already initiated the process of seeking environmental approvals. It will source gas from its facilities across the world. The terminal began with a capacity of 2.5 mt a year and was expanded to 3.6 mt after Shell completed ‘de-bottlenecking’ in December 2008.

Shell uses the Hazira terminal exclusively for regasifying spot LNG, as part of a global business strategy.

The company said capacity utilisation at its terminal was fairly good. Given the anticipated deficit in domestic gas, most companies would have to rely on sourcing Re-gasified Liquid Natural Gas (RLNG) for their operations.

R-LNG prices are currently at $9.5 per million British thermal unit for the long-term and $16 per million British thermal unit in the spot markets.

Falling output from Reliance Industries' Krishna-Bavarian basin has led to an increased demand for spot LNG. Natural gas output from the Krishna Godavari (KG)-D6 block has touched its lowest since it began production in 2009. The fields as of December 2011 are producing only 38-39 mscmd (million standard cubic meters per day).

“Gas production from the KG basin has reduced to 40 million standard cubic meters per day and has been declining seven-eight per cent per quarter against a normal decline rate of seven-eight per cent per year. The sharp decline is partly due to lack of new wells being put into production and partly due to shutdown of two wells on the back of water ingress," said J M Financial analysts, in a recent note to client.

Analysts say KG-D6 production is likely to remain at subdued levels over the next couple of years, especially in comparison to the earlier anticipated production of 60-80 mscmd.

According to Icra Rating Ser-vices, India's natural gas supply was adversely impacted in 2011-12 due to the KG-D6 fall. “Overall, domestic natural gas supplies may increase to around 153 mscmd by 2014-15 from 143 mscmd in 2010-11. The current estimate is 22 per cent lower than our previous estimates of 195 mscmd, primarily due to lower KG-D6 production and delays anticipated in commissioning of KG satellite fields,” a recent report released by Icra said.

For a little over seven years, India has been using R-LNG and has two operational terminals at Dahej (also in Gujarat), operated by Petronet LNG, and Hazira. India imports around 50 mscmd of LNG through these terminals.