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GAIL eyes GSPC LNG's Morbi stronghold

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ET Realty
06th May, 2019 15:00 IST
File photo AHMEDABAD: GSPC LNG, the trading arm of Gujarat State Petroleum Corp (GSPC) group is likely to face stiff competition from India’s largest natural gas marketer GAIL (India) that is looking to enter Morbi for selling natural gas.

The country’s biggest ceramic manufacturing cluster at Morbi is regarded as a stronghold for Gujarat Gas that sells nearly half of its total natural gas here.

Gujarat Gas buys its entire LNG requirement from GSPC that is banking on gas supplies from the newly built LNG terminal at Mundra to meet the growing demand from Morbi.

The terminal project by GSPC LNG is likely to receive its first cargo in the next two months.

A meeting between officials of GAIL and Morbi Ceramics Association was held this week where GAIL has offered to supply gas at rates better than Gujarat Gas, said officials close to the development.

A large number of ceramic tile makers are switching over to natural gas following the order of National Green Tribunal (NGT) for closure of ceramic units running on coal-gasifiers.

Gujarat Gas earlier supplied about 2.5 million metric standard cubic meter per day (mmscmd) to Morbi. However after the NGT order, its supply has almost doubled, said a government official.

“The total gas supply by Gujarat gas is about 8-8.5 mmscmd of which half is for Morbi. GAIL’s entry could cause a major upset for GSPC LNG. However, Gujarat Gas may not lose its income as it will continue to earn from the network tariff that GAIL would have to pay for using its pipeline infrastructure,” the official said.

Gujarat Gas’ five-year long marketing exclusivity for city gas distribution in Morbi ended recently, but it still has network exclusivity for a 25-year period.

“Diversification of suppliers is crucial to maintain uninterrupted flow to cater to any eventuality, GAIL said in a communication to the ceramic industry of Morbi. GAIL has offered to supply gas at rates that are linked to Henry Hub natural gas prices.

“We would not like a comment as it is a commercial matter,” said a GAIL official when contacted. Gujarat Gas and GSPC officials when contacted refused to comment on the matter.

To start with GAIL is looking to sell 0.5 mmscmd for a period of two months at about USD 7.50 per million British thermal units (MBTU), said an industry official.

“GAIL has approached Morbi ceramic units for supply of natural gas,” confirmed Nilesh Jetpariya, president, Wall Tiles Division, Morbi Ceramics Association (MCA).

The central PSU has worked out two options for Morbi ceramic industry, which include supply of gas through tankers and pipeline.

“Supplying gas through tankers will make gas costlier to the industry. GAIL will have to pay transmission charges to Gujarat State Petronet Limited (GSPL). ,” said an industry player.

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