Royal Dutch Shell Plc  .com Rotating Header Image Ispat to source LNG from GAIL, Shell Ispat to source LNG from GAIL, Shell

Sunday, 08 August , 2004, 09:09

Ispat Industries Ltd is in talks with GAIL(India) Ltd and Shell to source natural gas to run its 1.2-million tonne per annum Dolvi sponge iron plant at full capacity.

The company is negotiating to obtain natural gas supplies of around 2.3 million standard cubic metres per day (mscmpd).

Ispat hopes higher supplies will boost profits significantly as the Dolvi plant has been running 35 per cent below capacity because of gas shortage.

The company’s net profit dipped by 46 per cent in March 2004 to Rs 44.32 crore compared to Rs 82.8 crore last year. This is in spite of a higher turnover of Rs 3,734.3 crore against Rs 3,108.27 crore achieved last year.

“We have suffered because of the Government’s lopsided gas allocation policy that gives priority to fertiliser and power companies. But higher gas supplies through the planned Dahej-Uran pipeline should help us boost our productivity,” said Ashok Khinvasara, Ispat’s Director (Corporate Development).

Natural gas supplies from ONGC’s Mumbai High have been 0.8 mscmpd instead of the allocated 1.75 mscmpd, ever since the Union Government changed its gas allocation system.

The sponge iron produced at Ispat’s Dolvi plant is used as raw material for its 2.4-million-tonne per year hot-rolled steel coil plant. While the steel plant is running at full capacity, in line with the growing steel demand internationally, the sponge iron plant has relatively suffered, according to Khinvasara.

The company is negotiating for 1.5 mscmpd gas in addition to 1.75 mscmpd required from Mumbai High. Both GAIL (India) and Shell, which has offered gas from its 2.5-m.t. Hazira LNG terminal, have promised supplies by August next year, when the 489-km Dahej-Uran pipeline becomes operational.

A senior GAIL (India) official said, “We are in advanced stages of discussion for selling additional quantities of gas from Petronet LNG’s Dahej terminal. Ispat will be among the large gas customers along the planned Dahej-Uran pipeline.”

Although both GAIL (India) and Shell were negotiating with Ispat for long-term gas supply agreements, the company might consider short-term pacts with more than one supplier, he said.

“Even Indian Oil Corporation has approached us for a gas supply agreement for Petronet’s LNG. Instead of looking into long-term contracts, we would like to have the freedom to negotiate a more fluid deal,” Khinvasara said.

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