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Business News/ Companies / Gujarat Petro raises LNG unit capacity
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Gujarat Petro raises LNG unit capacity

Gujarat Petro raises LNG unit capacity

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New Delhi: State-owned Gujarat State Petroleum Corp. (GSPC) has raised the capacity of its planned liquefied natural gas (LNG) terminal by 30% to 6.5 million tonnes (mt) a year after a slump in prices of metals used in construction, two company officials said.

GSPC aims to have the plant ready by 2013 at a cost of Rs3,000-3,500 crore, and the sharp falls in prices of metals such as steel and nickel have allowed it to think bigger.

“Initially, it was for 5mt but then we found that we can raise the capacity up to 6.5 (mt) without much of an (extra) investment," a senior company official, who did not want to be identified, said on Wednesday.

GSPC will hold 50% stake in the project, while Ahmedabad-based Adani Group will take 25%, the official said. “We might sell the remaining 25% to some financial institutions or state refiners," he said.

A second senior official at the company confirmed the planned hike in capacity.

Prices of nickel, which is mainly used in producing stainless steel, have plummeted by at least 60% this year as output cuts from producers have failed to keep up with falling demand.

Steel prices and demand have also fallen sharply in the face of a global downturn, which has forced producers to instigate production cutbacks and slash jobs.

India is encouraging the use of natural gas with new supplies due to come online soon as it looks to control its oil import bill.

But falling global prices of naphtha have attracted some gas clients, such as power generation firms. An Indian Oil Corp. Ltd representative said on Tuesday the firm would sell 100,000t of naphtha to a new client from the power sector by January-end, reflecting the switch.

GSPC buys LNG from terminals at Dahej and Hazira, operated by Petronet LNG Ltd and Shell Corp., respectively.

The GSPC officials said the firm’s gas transportation subsidiary had seen a considerable fall in sales from 12 million standard cu. m a day (mscmd) in June to 7mscmd.

GSPC, which did not buy a spot LNG cargo this month, may look at securing one cargo for January loading as Petronet is planning a week-long shut down of its terminal to raise capacity.

Despite the price attraction of cheaper naphtha, gas demand in India is still running far ahead of supplies totalling about 95mscmd.

Supply is expected to double by 2009 after new gas fields, including those of Reliance Industries Ltd, start production.

Goldman Sachs Group Inc. estimates the share of natural gas in India’s coal-dominated energy basket will double to 18% by 2015 and stabilize at 20% by 2025.

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Published: 17 Dec 2008, 10:42 PM IST
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