Ahmedabad/Mumbai: Reliance Industries Ltd’s joint venture with BP Plc, Torrent Power Ltd, GAIL (India) Ltd and Petronet LNG Ltd are in race to pick up a 25% stake in the proposed liquefied natural gas (LNG) terminal at Mundra in Gujarat, according to three people familiar with the development.

Gujarat government-owned Gujarat State Petroleum Corp. Ltd (GSPC), which has a 50% stake in the project, had invited expressions of interest for companies willing to pick up stake in the 5,000 crore project. The last date for submitting the tenders was 8 April.

Adani Enterprises Ltd holds a 25% stake in the project.

GSPC has set up a special purpose vehicle, GSPC LNG, for implementing the LNG project with a proposed capacity to re-gasify 5 million tonnes per annum (mtpa).

“The cost of the project is about 4,500-5,000 crore with a debt-equity ratio of 2:1. For 25% stake, GSPC is aiming to raise at least 350-400 crore," said a Gujarat government official, declining to be identified.

India Gas Solutions, a 50:50 joint venture between RIL and BP, earlier this year signed a non-committal pact with the Gujarat government for studying locations in the state to set up an LNG terminal.

“From the past two-three years, RIL has been weighing the option to set up a 5 mtpa LNG terminal at Sikka near Jamnagar, close to Moti Khavadi where it runs the world’s biggest refining complex," said an RIL official, requesting anonymity. “The company is expanding by setting up a petrochemical complex at Jamnagar and will require about 2.5 mtpa for captive purpose."

Presently, RIL imports costly gas on a spot basis from LNG terminals at Dahej and Hazira, both in Gujarat. It is the largest buyer of LNG in the country, importing 2-3 spot cargos every month for its refinery, according to an official working with the Gujarat Maritime Board, the regulator for all non-major ports and jetties in the state.

India Gas Solutions may reconsider plans for the standalone LNG project in Gujarat if it succeeds in picking up stake in the Mundra project, said the government official quoted earlier.

RIL spokesperson declined to comment on the matter

As for GAIL, a company official explained why it is seeking a stake in the proposed Mundra LNG terminal.

“GAIL is entirely dependent on availability of natural gas. It has already got a network of pipelines for gas transportation throughout the country and it is seeking to maximize capacity utilization. Moreover, the production in D6 has also fallen sharply. Hence, to acquire a stake in Mundra LNG terminal on Gujarat coast is a natural extension for GAIL," this official said, also on condition of anonymity.

“We have also commissioned 5mt LNG terminal at Dabhol, Maharashtra and it is seeking to double its capacity by 2016," the official said, adding that GAIL has booked 8 million metric tonnes per annum of gas from long-term energy sources.

In 2008, the Gujarat government decided to set up an LNG terminal at Hazira. GSPC was to hold a 50% stake in the project with management control while Adani and Essar Power Ltd were to each hold 25% stakes. Essar later backed out of the project and the site of the terminal was shifted to Mundra.

The project has been delayed by at least three years due to uncertainty over equity sharing and other delays in project execution. While Adani wanted an equal partnership in the project, the government did not wish to give more than 25% equity to a single stakeholder.

The project is expected to be commissioned by 2016 and GSPC LNG has completed pre-project activities and initiated a bidding process for selection of contractors for the facilities for receiving, regassifying and gas evacuation.

GSPC Gas Co. Ltd, an arm of GSPC, distributes 3.5 million metric standard cubic meter per day of natural gas to close to 350,000 industrial, commercial, domestic and compressed natural gas consumers. In October, BG Group Plc sold its majority stake in Gujarat Gas Co. for about 2,463 crore.

Earlier in March, BG announced it had completed an agreement with GSPC for the long-term sale of up to 2.5 mtpa of LNG to GSPC. Gas from this deal is likely to be used for the LNG terminal.

Besides, GSPC has also entered into an initial agreement with Russian oil and gas company Gazprom for long-term supply of gas. Torrent Power has an installed capacity of 1,150 megawatt (MW) (gas-based) at its Sugen plant in Surat and 500MW at Ahmedabad, of which 400 MW is coal-based and 100 MW is gas-fired. The company plans to add another 400 MW at Sugen and is in advanced stages of setting up a 1,200 MW gas-fired plant at Dahej, said a second government official familiar with the development.

In January, Torrent Power said its profit declined 55% from a year earlier to 95.66 crore in the quarter ended 31 December. The company attributed this to a fall in domestic gas supply, as a result of which the plant load factor at its Surat facility dropped to 35.95% in the third fiscal quarter from 70.41% a year earlier.

An email sent to Torrent Power remained unanswered.

Petronet LNG runs the Dahej import terminal in Gujarat that has an installed capacity of 10 mtpa, and which it aims to raise to 15 mtpa in one or two years. The company is also in the process of setting up an LNG terminal at Kochi in Kerala.

A.K. Balyan, managing director and chief executive of Petronet LNG, didn’t respond to phone calls or to a message left on his cellphone.

India faces a huge shortage of gas and many of its gas-fired plants are lying idle. Demand for gas in the country in 2012-13 was about 70 mtpa against a domestic supply of 28 mtpa and imports of 14 mtpa.

This gap is expected to further widen as the energy demand is expected to rise to 90 mtpa against the domestic supply of 31 mtpa and LNG imports of 25 mtpa in 2014-15, according to an energy expert.

“There is plenty of interest in the oil and gas space but convoluted government policies have created hurdles for the sector," said Samir Bahl, executive director, investment banking, at Centrum Capital Ltd. “However, stake in GSPC’s Mundra terminal is a lucrative option for the bidders.

The state of Gujarat not only has a pro-industry environment but it also offers political stability to business houses. Moreover, Gujarat as a state exemplifies how a state can promote successful public private partnerships."

There are three operational LNG terminals in the country including two in Gujarat and one in Maharashtra.

Plans are on for setting up LNG terminals in various locations of the country including Swan Energy’s proposed terminal at Hazira, Gujarat State Fertilizer Corp.’s terminal at Sikka, Shapoorji Pallonji’s project in Kodinar, GVK Group’s terminal near Okha, India Gas Solutions’ terminals on the East and South coast and Indian Oil Corp.’s LNG terminal at Ennore.

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