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New Delhi: India’s petroleum ministry may seek approval from the cabinet committee on economic affairs for state-owned oil firms to buy Asian Development Bank’s 5.20% stake in Petronet LNG Ltd.

State-controlled firms such as Indian Oil Corp. Ltd, Oil and Natural Gas Corp., Bharat Petroleum Corp. Ltd and GAIL (India) Ltd have requested approval from the oil ministry to purchase the stake in the liquefied natural gas company.

India has only two functioning LNG regasification terminals, both in Gujarat. One is owned by Petronet (with a capacity of 10 million tonnes per annum, or mtpa) and the other by Shell India (2.5 mtpa). Other terminals in the works include one each in Dabhol (5 mtpa), Kochi (5 mtpa), Mangalore (5 mtpa) and Mundra (5 mtpa).

Offshore link: Petronet’s LNG terminal in Gujarat. The terminal is one of India’s two functioning LNG regasification terminals

“While the issue has been put up for the petroleum ministry’s consideration, this requires CCEA’s approval. A note for CCEA may be moved shortly," a person aware of the development said, requesting anonymity. “Whether the stakeholders will be acquiring ADB’s stakes in one go or in tranches needs to be discussed."

India has a current LNG import capacity of 14 mtpa, which will increase to 20 mtpa in the current fiscal. This is further expected to increase to 50 mtpa by 2017.

While a petroleum ministry spokesperson declined to comment, an ADB spokesperson in an email reply said, “ADB has held a 5.2% stake in Petronet LNG since 2004. ADB always looks to exit its equity investments once it believes that the development mission has been accomplished."

While Australia and West Asia are the principal source of LNG supply, China and India are its major consumers.

“Existing promoter shareholders in Petronet, Bharat Petroleum, GAIL, Indian Oil Corp., and Oil and Natural Gas Corp, have expressed an interest in buying ADB’s stake as provided for under existing pre-emption rights," the ADB spokesperson said. “The government of India needs to give its approval before these shareholders can purchase ADB’s shares."

The total supply of natural gas in India is around 167.8 million standard cu. m per day (mscmd), including imported LNG, against a demand of 220 mscmd. Of this, LNG accounts for around 20%, or 44 mscmd. India imports around 1 mtpa of LNG bought in the spot markets.

IFCI Financial Services Ltd in a 27 January report on Petronet LNG said that the demand scenario for the company was strong because of factors such as “anticipated lower domestic gas output at RIL’s KG D6 basin until FY13," and high prices of naphtha and fuel oil.

Gas production from Mukesh Ambani-owned Reliance Industries Ltd’s D6 field in the Krishna-Godavari (KG) basin is falling and may further dip to 22.6 mscmd in 2013-14.

According to the projections, the current production of around 37 mscmd will dip to 27.6 mscmd in the next fiscal (2012-13). In 2013-14 production is estimated at around 22.6 mscmd.

To provide a push for the creation of LNG infrastructure in the country, finance minister Pranab Mukherjee in the national budget extended the viability gap funding, or the grant given by the government to make unprofitable projects viable for private companies, to new sectors including LNG storage facilities and pipelines. The budget also proposed scrapping the import duties on LNG.

Speaking at the seventh Asia Gas partnership summit on Friday, G.C. Chaturvedi, secretary in India’s petroleum ministry, said India’s growth has been phenomenal over the years in LNG, and in the future, the projected growth seems to be at a sustainable rate.

utpal.b@livemint.com

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