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Economic Times (India): Shell gets show cause for Hazira terminal’s 'non-performance'

AHMEDABAD: The Gujarat Maritime Board (GMB) has slapped a show-cause notice on Shell Hazira, the developer of the Rs 3,000-crore, 2.5 mmpta LNG terminal at Hazira, asking why “necessary legal action” cannot be initiated against the company for not complying with the conditions put down in the concession agreement under the GMB Act.
GMB, which is the regulatory body for all minor ports in the state, has cited “non-performance” of the LNG terminal besides the “delay” in construction of non-LNG cargo facilities, as agreed to by the company in the concession agreement. These facilities in the phase II development include a container terminal as well as solid cargo port that is mandatory under the 30-year concession agreement.
Shell Hazira, part of the Royal Dutch Shell group, is the biggest private investor in Gujarat’s port sector. ET had reported on February 24 that trouble was brewing between GMB and Shell Hazira over the delay in phase II construction and that the regulator was preparing to seek clarifications.
“As against the assured cargo guaranty of 17 LNG vessels, Shell Hazira has managed to bring only three, since commissioning the terminal in April last year. This underperformance means a loss in revenue to the state government,” a source familiar with the development told ET.
The company had supplied 1.8 lakh tonnes of LNG from the three shipments to the state-owned oil exploration and production company Gujarat State Petroleum Corp. The 2.5 mmpta LNG terminal at Hazira has been operating at a very low capacity as the high prices of gas has deterred buyers.
Top officials of the maritime board, however, are not willing to talk about the issue. “We do not want to comment anything on this,” GMB’s vice-chairman and chief executive officer HK Dash told ET.
But sources said that GMB is livid as Shell is “neither identifying the partner for container terminal and solid cargo port nor informing the regulatory body about the progress.” As per the concession agreement, Shell has to begin the work for non-LNG facilities within 14 months of commissioning the LNG terminal, sources added.
GMB feels that the delay and “non-responsive” posture of Shell is despite the fact that the state government had “fully co-operated” with the company by sorting out issues like conservator of ports, permissions regarding landing and shipping and others.
Also, the issue of Rs 5 crore “outstanding” dues that GMB has been demanding from the company for dredging and reclaiming some land within the GMB port limits, has been kept at bay, while giving the permissions. The same issue had jeopardised Shell Hazira’s plans to bring its first LNG shipment last year, following which the company had sought chief minister’s intervention.
Shell is looking at a 49% equity partnership in the container terminal for which it was talking to Maersk, Dubai Ports International and Port of Singapore Authority (PSA). The total investment in bulk cargo and container terminal is estimated to be Rs 3,000 crore.

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