Mumbai: Gujarat State Petroleum Corporation Ltd (GSPC) and the Adani Group, the promoters of Gujarat’s Mundra port, are talking to gas suppliers in Iran, Russia and Australia to source gas for a five-million-tonne-capacity liquefied natural gas terminal there.
“Sourcing of LNG is key to the success of the project,” said an official of the Gujarat government-owned company, who did not want to be named. “That is the real challenge.” He declined to provide details.
Other companies, such as GAIL (India) Ltd, which tried to get reasonably-priced LNG supply to the Dabhol power plant, have struggled as natural gas prices are above their mean levels.
The Mundra LNG terminal is expected to start operations in 2011 when the demand for gas in Gujarat will rise to an estimated 105 million metric standard cubic metres per day (mmscmd) from the current level of 60mmscmd.
GSPC, the only exploration and production firm owned by the state government, has signed memorandums of understanding (MoUs) with the Adani Group and Essar Energy Holdings to set up one LNG terminal of five-million-tonne capacity each at Mundra and Pipavav, respectively.
Each terminal will require about Rs2,640 crore to build.
“These entities have approached the Gujarat Maritime Board for clearances to set up the terminal,” said H.K. Dash, the board’s vice-chairman and chief executive officer. The board is the regulatory body that oversees the development of all ports owned by the state government.
The proposed two new LNG terminals will add to the two LNG terminals operating at Hazira and Dahej ports. The five-million-tonne (mt) capacity LNG terminal at Hazira port is operated by the Royal Dutch Shell Group, while a similar capacity terminal at Dahej port is run by Petronet LNG Ltd (PLL), a firm promoted by four state-owned oil firms—IOC, GAIL, HPCL and BPCL.
Petronet LNG is in the process of raising the capacity of Dahej terminal to 7.5mt. It has a long-term agreement with Qatar’s RasGas to buy gas.
GSPC currently lifts gas from Hazira and Dahej terminals and sells about 9mt to end-use customers in power, fertilizer, chemicals, steel, textiles, ceramics, glass and city-gas firms. GAIL sells about 16mt while the balance supply is met by IOC, BPCL and Shell.
GSPC will also take responsibility for marketing gas from the new LNG terminals apart from providing transport infrastructure for evacuating gas from the terminals through pipelines. It has set up a gas grid in Gujarat into which it will feed the gas.
The company also plans to connect the gas grid to GAIL’s HBJ pipeline in Bharuch. This will help GSPC supply gas to customers in Rajasthan, Delhi and other parts of North India.
For the 5mt Pipavav LNG terminal, 70% of the customers have already been tied up. Gujarat Power is setting up a 1,000MW gas-based power plant in Pipavav that will require one million tonnes of gas per year. “We are in the process of inviting price bids for finalizing the engineering, procurement and construction contract for the power plant,” the GSPC official said.
Essar would require another 2.5mt of gas for its steel plant and other captive uses.