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Reliance Likely to Buy LNG from Shell


MAY 5, 2009, 6:16 A.M. ET

MUMBAI — Reliance Industries Ltd., India’s biggest private refiner by capacity, is likely to sign an agreement with a group company of Royal Dutch Shell PLC to buy up to 4 million standard cubic meters per day of liquefied natural gas for two months, three persons familiar with the matter said.

Reliance is also likely to sign a separate agreement with Gujarat State Petronet Ltd. to transport the gas from Shell’s Hazira LNG terminal in the western state of Gujarat, to its refineries at Jamnagar, also in Gujarat, the persons, who asked not to be named, told Dow Jones Newswires.

When contacted, D. Jagatheesa Pandian, managing director of GSPL, said the company was likely to sign the contract soon.

“We are going to transport up to 4 MMSCMD of LNG from Hazira terminal to Reliance’s Jamnagar refineries,” Mr. Pandian added.

Another GSPL executive, who also declined to be named, said the agreement with Reliance was expected to be signed within the next week, when the LNG flow is expected to begin.

“I cannot give you any more details about the deal but it could mean that Reliance has bought a minimum of about one ship equivalent of LNG from Shell,” he said.

Mr. Pandian too didn’t provide any further details.

A spokesman for Reliance Industries didn’t reply to an emailed questionairre, while a Shell India spokesman wasn’t available for comment.

Hazira Terminal & Port Ltd., a Royal Dutch Shell group company, owns and operates an LNG terminal at Hazira. It is 74% owned by Shell Gas B.V. and 26% by France’s Total Gaz Electricite Holdings.

Reliance has been buying spot LNG from the Shell unit as it is yet to recieve a go-ahead from India’s federal government on when and how much of its gas from the D6 block in the Krishna Godavari basin – off the eastern coast – it will be able to utilize for captive consumption.

The D6 block is expected to produce nearly 80 MMSCMD, with initial output expected to reach 40 MMSCMD by July and full capacity by next March.

The Indian government has formed a utilization policy to allocate Reliance’s gas, giving priority to various users.

Fertilizer plants will get first priority as an acute gas shortage has forced them to shut down or cut utilization. Gas-starved power plants will be given second priority, a move that can significantly reduce electricity shortage and blackouts.

Reliance recently signed contracts to supply around 11.0 MMSCMD from its D6 block to 11 power plants and 15 MMSCMD to 12 fertiliser companies in the country.

Reliance operates the block with a 90% stake; Canada’s Niko Resources Ltd. owns the rest.

Gujarat State Petronet has a 15-year agreement with Reliance for the transportation of 11 MMSCMD from Reliance’s Krishna Godavari natural gas from Bharuch in southern Gujarat to Jamnagar, where Reliance has two refineries with capacities of 660,000 barrels a day and 580,000 barrels a day respectively.

Write to Sunil Raghu at [email protected]

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