GAIL, India's largest gas utility, announced on Friday that it has agreed to explore ethane sourcing and other opportunities along the energy value chain with Shell Energy India Pvt Ltd.

GAIL intends to import ethane from the United States in order to replace natural gas and naphtha as feedstock in 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 operates a petrochemical plant in Pata, near Kanpur, Uttar Pradesh, and is planning another in Usar, Maharashtra.

After the government diverted gas supplies from the plant to city gas suppliers, the company was forced to reduce run rate at Pata. As a result, its profitability has suffered, and the company is now looking to supplement the feedstock with ethane.

"This is a step forward for GAIL in achieving improved sustenance in business operations," the statement on the MoU signing with Shell Energy India said.

“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 the largest natural gas company in India. It owns and operates a natural gas pipeline network spanning approximately 14,830 kilometres across the country. It controls approximately 68% of the gas transmission market and sells 53% of all gas sold in the country.

Because of the shale gas revolution, which has produced an abundance of liquefied natural gas (LNG) and liquefied petroleum gas, ethane is expected to be produced in large quantities in North America (LPG). It is primarily used as a petrochemical feedstock in the steam cracking process to produce ethylene.

Ethylene is the raw material for a wide range of products, including packaging films, wire coatings, and squeeze bottles, as well as plastics and synthetic rubber.