GAIL signs pact with Shell to explore ethane sourcing

India's largest gas utility GAIL on Friday said it has signed an agreement with Shell Energy India Pvt Ltd to explore ethane sourcing and other opportunities along the energy value chain. GAIL is planning to import ethane from the US to replace natural gas and naphtha as feedstock at petrochemical plants.

In a statement, GAIL said it has signed a memorandum of understanding with Shell Energy India to "explore opportunities for infrastructure development for ethane sourcing." GAIL last month floated a tender to hire a very large ethane carrier (VLEC) for 20 years starting mid-2026 for importing ethane from the US. The ship with capacity of 80,000 to 99,000 cubic metres is targeted to take deliveries from the US ports of Marcus Hook, Nederland, Morgan's Point or Beaumont and deliver ethane at Dahej or Hazira in Gujarat or Dabhol in Maharashtra.

GAIL has a petrochemical plant at Pata, near Kanpur in Uttar Pradesh, and is also looking to set up another unit at Usar in Maharashtra. The company had to cut down on run rate at Pata after the government diverted gas supplies from the plant to city gas suppliers. This led to its profitability being impacted and so now the company is looking to supplement the feedstock with ethane.

"For GAIL, this is a step towards achieving improved sustenance in business operations," the statement said on MoU signing with Shell Energy India. "In a bid towards diversification of the feedstock for its petrochemical plant, GAIL is looking to import ethane from ethane-surplus countries with matured export terminal infrastructure through water-borne transportation to India and transport it further through GAIL's pipeline systems to demand centres."

The MoU envisages to explore prospects in import and handling of different hydrocarbons which are important chemical and petrochemical precursors, LNG for road transport, regasification of imported LNG and renewables, the statement added. GAIL is India's largest natural gas company. It owns and operates a network of around 14,830 kilometres of natural gas pipelines spread across the length and breadth of the country. It commands around 68 per cent market share in gas transmission and sells 53 per cent of all gas sold in the country.

Ethane is expected to be produced in large volumes in North America due to the shale gas revolution, which has generated an abundance of liquefied natural gas (LNG) and liquefied petroleum gas (LPG). It is primarily used as petrochemical feedstock to produce ethylene by steam cracking. Ethylene is the starting material for making a wide range of products -- from packaging films, wire coatings, and squeeze bottles as well as plastics and synthetic rubber.