Bangalore/Mumbai: The operator of Dhamra port in Orissa plans to build India’s first liquefied natural gas (LNG) terminal on the east coast at an estimated cost of Rs 3,000-3,500 crore.
The move by Dhamra Port Co. Ltd (DPCL), a joint venture between Larsen and Toubro Ltd and Tata Steel Ltd, looks to tap growing demand for fuel from power plants and fertilizer units in the region, and comes at a time when the country faces a severe shortage in local gas supplies.
The proposed LNG import terminal is critical as output from the D6 block, India’s biggest natural gas reservoir in the Krishna-Godavari basin run by Reliance Industries Ltd, has fallen short of initial estimates.
Against a targeted production of 60 million standard cubic metres per day (mscmd), output from the D6 block stands at around 51-52 mscmd and may dip further to 47 mscmd by 2013. A rise in production may not be possible until at least 2015, Reliance recently informed the government.
DPCL has invited a few Dutch and Belgium dredging companies operating in India, including Dredging International NV, Van Oord Dredging and Marine Contracting Co. NV and Jan De Nul NV, to submit price quotations to deepen the channel where the terminal will be built to allow LNG ships to dock, said two people familiar with the development.
Executives at each of these firms said invitations have been sent out to them by DPCL seeking budgetary estimates for dredging. None of the people agreed to be named.
DPCL has also started preliminary discussions with Petronet LNG Ltd, India’s biggest LNG importer, to finalize a possible deal, under which Petronet will construct the berth, erect a LNG regasification terminal and operate the facility, said one of the persons familiar with the development.
“It is bad commercial relations to discuss anything until it is finalized,” said Santosh Kumar Mohapatra, chief executive officer, DPCL.
“Petronet may set up an LNG terminal on India’s eastern coast, possibly in Orissa,” said A.K. Chopra, general manager, public relations, Petronet. “Discussions have started, but the port location is yet to be finalized.”
The finalization of the site will depend on the demand for gas in the region and depth at the port where LNG ships can dock, he added..
Situated between Haldia and Paradip ports, Dhamra is one of India’s deepest ports with a depth of 18m, allowing the biggest of the dry bulk ships with capacities to load up to 180,000 tonnes to dock. The port’s master plan provides for 13 berths of various types, capable of handling 109 million tones (mt) a year.
The Rs 2,460-crore first phase of the port, with a capacity to handle 27 mt of cargo, started commercial operations in May from two fully mechanized berths capable of handling coking coal, steam and thermal coal, limestone and iron ore.
Being a private port, Dhamra is free to set rates. Rates at Union government-controlled ports are set by the Tariff Authority for Major Ports.
India has an LNG import capacity of 13.5 million tonnes per annum (mtpa) through two terminals, accounting for about 20% of the country’s gas requirements.
Petronet runs India’s first LNG receiving and regasification terminal at Dahej in Gujarat having a capacity of 10 mtpa, equivalent to 40 mscmd of natural gas.
A joint venture of Shell Gas BV and Total Gaz Electricité Holdings France runs a 3.5 mtpa capacity LNG terminal at Hazira, also in Gujarat.
Petronet is constructing a new 5 mtpa LNG terminal at Kochi in Kerala that is expected to start operations in the third quarter of 2012.
Another LNG terminal at Dabhol in Maharashtra with a capacity of 2.5 mtpa is also likely to start in 2012.
All these LNG terminals are on the western coast.
“LNG receiving terminals were set up on the western coast because of their proximity to the market (customers),” said Petronet’s Chopra.
“Now, market is coming up in other areas also, necessitating facilities on the eastern coast.”
India’s gas demand is expected to reach 381 mscmd by 2015, compared with a supply of 202.9 mscmd.
LNG is natural gas cooled to minus 162 degree Celsius. At that temperature, the gas condenses into liquid that occupies less space, making it feasible and easier to transport it over long distances.
LNG is loaded on specialized ships and delivered to a regassification terminal where it is reheated, turned into gas and distributed to customers through a pipeline network.