Shell shuts Hazira amidst R-LNG downturn

Cheap D6 gas flooding the market has crippled demand for spot R-LNG in Gujarat and forced oil and gas major Shell to indefinitely suspend operations at its Hazira LNG import and regassification terminal. PETROWATCH learns Shell shut the 3.67m t/y terminal on January 26, India’s Republic Day, and has given no date for it to reopen. “It may even be in March,” speculates one industry source. Publicly, Shell says it is closing the terminal only for “routine annual maintenance” but the real reason is because spot LNG imports are slow, both at Hazira and at Petronet-LNG’s 10m t/y Dahej terminal, located 65-km to the north. “Shell has not brought in any spot cargoes for some time now,” adds a source. “At Hazira, it was very dull before and after Christmas - perhaps the leanest ever since the terminal started (in April 2005).”

Look at Torrent Power to understand the attraction of D6 gas over R-LNG. Torrent pays $6.92/mmbtu at the ‘burner tip’ for 4.5m cm/d D6 gas to its 1147.5-MW power station. But if it were to use spot LNG imported recently from Repsol, it would instead be paying a whopping $9.61/mmbtu! The landfall price of D6 gas at the Kakinada landfall is $4.2/mmbtu but the delivered price varies from state to state, as it must include transmission costs and marketing margins. Torrent’s D6 price of $6.92/mmbtu includes $0.135 Reliance marketing margin, $0.93 transmission costs, VAT charged at 15% and service tax at 10.3% of the transmission costs. It also includes $0.46/mmbtu that Torrent pays Gujarat Petronet for last mile transmission from Bharuch - where D6 lands after passing through Reliance’s east-west pipeline. The $9.61/mmbtu price Torrent would have paid for the Repsol spot cargo includes $0.18 marketing margin, $0.61 transmission charge, $1.10 VAT, $0.06 service tax plus $0.046 for last mile connectivity all added to the $7.20/mmbtu ex-terminal CIF price. All in all, it’s not difficult to see why Shell has not announced when it’s re-starting the Hazira terminal. 

NOTE: Reliance was ironically the main customer for Shell at Hazira bringing in three cargoes a month for its Jamnagar refineries. “But after early December, Reliance didn’t import any cargos,” we hear. That is hardly surprising, as the Empowered Group of Ministers allocated 2.34m cm/d D6 gas to the two Jamnagar refineries on October 27 last year. Petronet-LNG is facing a similar downturn, with only two spot cargoes imported recently at Dahej. LNG tanker Castillo De Villa Alba brought in a 63m-cubic metre cargo for GAIL from Repsol on November 23 last year and after that tanker Neo-Energy brought in an 82m-cubic metre cargo for GSPC from British Gas on December 17.

Source: Petrowatch

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