Ahmedabad: The public sector liquefied natural gas (LNG) company, Petronet LNG Ltd, wants to raise LNG capacity at its Dahej terminal from five million tonnes per annum (mtpa) to 15mtpa. Petronet has asked the Rs18,000 crore, Ahmedabad-based Adani Group to help create an additional 2.5mtpa capacity to handle LNG at its upcoming multi-purpose cargo terminal at Dahej.
The Adanis have an agreement with Petronet to build a multi-cargo port near Petronet’s Dahej LNG facility. Both plan to build three berths at a cost of around Rs1,200 crore.
“Petronet had earlier planned to raise its capacity to 10mtpa but now wants to raise it to 12.5mtpa on its own and the rest 2.5mtpa would be done by the Adanis,” a senior Petronet oficial working at the Dahej facility said.
Petronet managing director P. Dasgupta did not respond to an email seeking additional comment on this issue.
The demand for natural gas in India is expected to grow at 16% to 80mtpa by 2009-10 and reach 104.26mtpa by 2024-25, according to Hydrocarbon Vision 2025, a ministerial group set up by the Prime Minister to provide a long-term focus on the country’s energy security.
On the supply side, the two major public sector producers—Oil and Natural Gas Corp. Ltd (ONGC) and Oil India Ltd—account for 78% of the total natural gas production in India. However, the situation is going to change because of large discoveries of gas from New Exploration and Licensing Policy (Nelp) blocks off the East coast.
“The incremental demand could not be met by the supply from sources in the East coast. On account of this, import from international markets in the form of LNG would be required and higher regassification capacities of LNG terminals, including Dahej, could be thought of,” said a senior analyst at a multinational consultancy firm who did not want his name to be used.
However, he questioned the viability of raising the capacity beyond 10mtpa at this stage. “It takes three years to build a greenfield LNG terminal and the one with the Adanis would be sort of a greenfield one as it is being built at a separate site. By the time it goes on stream, Reliance Industries Ltd would have brought its natural gas from the Krishna-Godavari basin. It is difficult to fathom that LNG would be able to compete with domestic natural gas in 2010,” the analyst added.
Petronet has already written to the Gujarat government asking for land to expand its LNG terminal as most of the land around its terminal has been notified as a special economic zone for ONGC’s Rs13,600 crore petrochemical complex and a plant to extract ethane and propane from LNG.
“We need to wait and see as the Adanis will have to approach the Gujarat Maritime Board (GMB) and other state government departments to get the terms of reference and clauses of existing concession agreement for the multi-cargo Dahej terminal changed. This is a must as per the statutory requirements,” a senior GMB official said under condition of anonymity.
GMB is the nodal agency for port development along the Gujarat coast.
Another analyst who tracks the energy sector for a consulting firm also questioned Petronet’s plans to raise LNG capacity at Dahej. “It does not make sense without tying up for LNG in the international market, as Petronet found it difficult to tie up gas for the Dabhol project, too. It could tie up with Qatargas for the next year-and-a-half at a rate of $8.5 (Rs344.25) per million British thermal unit (mBtu) including the cost of the goods, the freight or transport costs and marine insurance. That is a bit high for 2009-10,” the analyst added.
It is also not clear whether the Adanis would be interested in building an LNG facility for Petronet as they already have an agreement with the Gujarat State Petroleum Corp. Ltd for a 5mtpa LNG terminal at Mundra in Kutch.