New Delhi: India’s biggest gas utility plans to use some of the liquefied natural gas it gets from the US to restart three idled fertilizer plants, according to people with knowledge of the matter.
State-run GAIL India Ltd plans to supply the factories in eastern India with more than a third of the LNG it’s contracted to buy from the US, said the people, asking not to be identified as they aren’t authorized to speak to the media. The facilities were shut from 1990 onward because they became unviable. The company will connect them by pipelines to supply the imported gas, the people said.
Prime Minister Narendra Modi’s cabinet last year approved policies to help revive the plants as part of a plan to make the second-most populous nation self sufficient in the production of urea, which can be made from natural gas and used as fertilizer. The country’s fertilizer sector has overtaken power producers as India’s biggest user of natural gas after a government move to combine LNG and domestic gas supplies lowered prices.
Hindustan Urvarak & Rasayan Ltd, a joint venture of top state-run companies including Coal India Ltd, utility NTPC Ltd and refiner Indian Oil Corp., is investing Rs17,500 crore ($2.7 billion) to revive the plants. Sindri in Jharkhand state, India’s first fertilizer factory, started in 1951 and was shut in 2002. The other plants are in Gorakhpur in the state of Uttar Pradesh and Barauni in Bihar.
GAIL rose as much as 1.2% to Rs442.6 and traded 0.8% higher as of 10:16 am in Mumbai on Wednesday. The stock has advanced 34% this year, outpacing a 22% gain in the benchmark S&P BSE Sensex.
The facilities, each with a similar capacity, will be able to produce a combined 3.9 million tonnes of the nitrogen fertilizer annually by the second half of 2020 using natural gas. Each of the plants would require about 2.5 million cubic meters of gas daily, the people said.
GAIL has found itself with a surplus of LNG and is seeking buyers for the 5.8 million tonnes of US gas it will start getting annually from next year. The company has committed to supply about 60% of the volumes to overseas customers through various deals, including three swap arrangements.
A GAIL spokeswoman said the company wasn’t immediately able to respond to requests for comment. Arun Kumar Gupta, managing director of Hindustan Urvarak, confirmed the plants will be supplied by gas from GAIL, but couldn’t provide details on how the gas will be sourced.
GAIL has hired capacity at a proposed LNG import terminal at Dhamra in the eastern state of Odisha, and is building new pipelines connecting the terminal to demand centers in eastern India. Bloomberg