Petronet LNG Ltd, which is expanding its Dahej terminal in Gujarat from 10 to 15 million tonnes (mt), has booked half of the planned capacity addition with GAIL (India) Ltd in return for an interest-free advance, which will be invested in the project.
Petronet, which plans to complete the expansion by 2015 at an investment of Rs 3,000 crore, said the advance from GAIL would take care of the 30% equity the company needed to invest in the expansion. For instance, if the project is completed at the estimated investment of Rs 3,000 crore, the advance from GAIL would be around Rs 900 core.
“We have signed an agreement with GAIL for giving them a capacity of 2.5 mt out of the 5 mt expansion planned at Dahej. This has been done on the ‘use or pay’ basis. We have booked our volumes and GAIL will have to use or pay. So we have an assured regassifcation income on half of the expanded capacity from GAIL. This was signed last month,” said A K Balyan, chief executive officer and managing director of Petronet.
Referring to the interest free advance, he added: “The advance will be enough to take care of our equity portion of 30% in the Dahej expansion project.” With gas demand expected to grow 14% in the next five years, GAIL, which owns 12.5% stake in Petronet, has been aggressively scouting for new liquefied petroleum gas (LNG) supplies. Earlier this month, it had signed an agreement with Russia’s Gazprom to buy 2.5 mt LNG annually for 20 years beginning 2018-19. GAIL, which doesn’t operate an LNG terminal, will use the Dahej capacity to import gas.
In December 2011, GAIL had signed an agreement to buy 3.5 mt of LNG a year for 20 years from Houston-based Cheniere Energy Partners LPs Sabine Pass terminal in Louisiana. In August this year, the company had signed an agreement with GDF Suez to buy 12 cargoes of LNG or about 800,000 tonnes from 2013 to 2014. Petronet has booked another one mt of the additional capacity with Gujarat State Petroleum Corp Ltd (GSPC), a Gujarat government company. “GSPC has also signed an agreement with a use or pay clause,” Balyan said. Petronet plans to market gas from the remaining one-plus mt capacity on its own.
In related news Petronet LNG’s Kochi terminal will also go on stream in January 2013, the company’s Managing Director and CEO, Dr A K Balyan, informed recently. However, the terminal will operate only to less than a fifth of its capacity, because the off-take infrastructure is not yet ready.
What will soon be ready is a 50 km pipeline that will deliver gas to industrial customers in the neighbourhood of Kochi—such as Kochi Refineries and FACT, the fertiliser manufacturer.
The major pipelines (being laid by GAIL)—one connecting the Kochi terminal to Bangalore and the other to Mangalore - are likely to be ready only by December 2013. At that stage, the Kochi terminal will be able to achieve over 80% utilisation, Dr Balyan said.
Petronet LNG is also gearing itself up to build another LNG importation, storage and regassification terminal at the eastern port of Gangavaram, Andhra Pradesh.
Dr Balyan said that as the project awaits environmental clearance, Petronet LNG is going ahead with “pre-award” activities, so that the moment the clearance is secured, the award of various contracts could be done.
The Gangavaram terminal is being put up under a separate company, in which the Gangavaram Port and the public sector oil refiner, Hindustan Petroleum Corporation Ltd will be shareholders.
There have been reports that the Gangavaram project would have a “strategic partner” too. Asked about this, Dr Balyan said that the issue of getting on board a strategic partner has not yet been closed.
Petronet, which plans to complete the expansion by 2015 at an investment of Rs 3,000 crore, said the advance from GAIL would take care of the 30% equity the company needed to invest in the expansion. For instance, if the project is completed at the estimated investment of Rs 3,000 crore, the advance from GAIL would be around Rs 900 core.
“We have signed an agreement with GAIL for giving them a capacity of 2.5 mt out of the 5 mt expansion planned at Dahej. This has been done on the ‘use or pay’ basis. We have booked our volumes and GAIL will have to use or pay. So we have an assured regassifcation income on half of the expanded capacity from GAIL. This was signed last month,” said A K Balyan, chief executive officer and managing director of Petronet.
Referring to the interest free advance, he added: “The advance will be enough to take care of our equity portion of 30% in the Dahej expansion project.” With gas demand expected to grow 14% in the next five years, GAIL, which owns 12.5% stake in Petronet, has been aggressively scouting for new liquefied petroleum gas (LNG) supplies. Earlier this month, it had signed an agreement with Russia’s Gazprom to buy 2.5 mt LNG annually for 20 years beginning 2018-19. GAIL, which doesn’t operate an LNG terminal, will use the Dahej capacity to import gas.
In December 2011, GAIL had signed an agreement to buy 3.5 mt of LNG a year for 20 years from Houston-based Cheniere Energy Partners LPs Sabine Pass terminal in Louisiana. In August this year, the company had signed an agreement with GDF Suez to buy 12 cargoes of LNG or about 800,000 tonnes from 2013 to 2014. Petronet has booked another one mt of the additional capacity with Gujarat State Petroleum Corp Ltd (GSPC), a Gujarat government company. “GSPC has also signed an agreement with a use or pay clause,” Balyan said. Petronet plans to market gas from the remaining one-plus mt capacity on its own.
In related news Petronet LNG’s Kochi terminal will also go on stream in January 2013, the company’s Managing Director and CEO, Dr A K Balyan, informed recently. However, the terminal will operate only to less than a fifth of its capacity, because the off-take infrastructure is not yet ready.
What will soon be ready is a 50 km pipeline that will deliver gas to industrial customers in the neighbourhood of Kochi—such as Kochi Refineries and FACT, the fertiliser manufacturer.
The major pipelines (being laid by GAIL)—one connecting the Kochi terminal to Bangalore and the other to Mangalore - are likely to be ready only by December 2013. At that stage, the Kochi terminal will be able to achieve over 80% utilisation, Dr Balyan said.
Petronet LNG is also gearing itself up to build another LNG importation, storage and regassification terminal at the eastern port of Gangavaram, Andhra Pradesh.
Dr Balyan said that as the project awaits environmental clearance, Petronet LNG is going ahead with “pre-award” activities, so that the moment the clearance is secured, the award of various contracts could be done.
The Gangavaram terminal is being put up under a separate company, in which the Gangavaram Port and the public sector oil refiner, Hindustan Petroleum Corporation Ltd will be shareholders.
There have been reports that the Gangavaram project would have a “strategic partner” too. Asked about this, Dr Balyan said that the issue of getting on board a strategic partner has not yet been closed.
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