The Hindu Business Line : Spot LNG players expect to grow despite rising gas production

Despite the spot LNG (liquefied natural gas) business being hit by the sharp rise in domestic natural gas production, most stakeholders in the business expect to post a growth due to their diversified business model and product portfolio.

The major players include Shell, Petronet LNG Ltd (PLL) and the GSPC group.

Shell major loser

Sources say that Shell is expected to post a drop in volumes in the immediate future.

Shell does only spot business from its Hazira terminal. Company officials were not available for comment.

According to sources, Reliance Industries Ltd (RIL) has indicated to the pipeline transporter Gujarat State Petronet Ltd (GSPL) that with D-6 gas allocation for its own use, it could stop taking supplies of 9-10 million standard cubic metre a day (mscmd) of spot LNG from Shell and Petronet by end of this month.

RIL emerged the single largest buyer in this market in the last few months. RIL sources have confirmed the move.

PSU power major NTPC Ltd has also informally indicated a sharp drop in its spot procurement of nearly 2.5 mscmd.

“We are expecting the arrival of spot cargoes (each having 65,000 tonne of LNG to be converted into 80 mscmd R-LNG) to come down from 6-7 to 2 from December,” an industry source said.

GSPL a net gainer

The drop in spot volume will be more than compensated by an increase in domestic gas supplies for the carrier GSPL.

The current volume that is being transported, of approximately 38 mscmd, will increase to 40 mscmd in December, according to sources. As D-6 steps up production in phases, GSPL’s prospects will only brighten during the rest of the fiscal.

Petronet LNG neutral

According to Mr Prasad Dasgupta, Chairman and Managing Director of PLL, while his company will lose the marketing margin on brisk spot business during the last few months, an increase in supplies of term gas beginning December and the resulting increase in regassification revenue will make up for this loss.

The company will get an additional term supply from RasGas taking the total tied up volume from 6.5 mtpa in October to 7.5 mtpa.

In addition, the company has entered into agreements for supplying 0.5 mtpa spot R-LNG to a PSU fertiliser company with immediate effect and 1 mtpa to the upcoming Pragati Power in Delhi beginning March 2010.