HPCL still open to LNG terminal project plan

Hindustan Petroleum Corporation Ltd plans to foray into liquefied natural gas terminal project once it is able to ensure supplies. A senior company official said, "We are still open to both the options - a greenfield project at Mundra or acquire stake in Shell's Hazira terminal, if the supply can be ensured."

The company has been mulling setting up a greenfield LNG terminal in Mundra, Gujarat, as part of its plan to enter the business of gas distribution. Besides, it has also been in talks with Shell for acquiring stake at the latter's Hazira terminal.

Brushing aside reports that HPCL has decided to back out of the race for Shell's Hazira project, after submitting a non-binding offer and completing the due diligence of the terminal, the official told Business Line, "The option is still open."

HPCL had entered into a memorandum of understanding with Shell India Pvt Ltd in March 2004 for product infrastructure and facility sharing between both the companies. The MoU envisaged that Shell and its affiliate companies and HPCL would evaluate and work towards an agreement for HPCL to participate in the LNG business in India.

As regards plans for developing a five million tonne per annum (MTPA) LNG import terminal at Mundra on its own, the official said detailed feasibility study had already been completed. The project cost is pegged at around Rs 2,600 crore. The scope of developing the LNG terminal at Mundra also includes associated gas evacuation pipelines from Mundra to Delhi.

Asked whether the company would also be looking for LNG supply, he said HPCL was looking at the known markets including West Asia for supplies. LNG is natural gas that has been chilled to liquid form, reducing it to one-six-hundredth of its original volume, for transportation by ship to destinations not connected by pipeline. On arrival, it is converted back into gas for distribution to power plants and other buyers.

In 2005-06, the domestic availability of natural gas in the country was 75 million standard cubic metre per day (MMSCMD). For 2006-07, the natural gas demand is projected at 231 MMSCMD. Under the Eleventh Five-Year Plan, a 41 per cent increase in domestic natural gas production is projected over the Tenth Plan period (224.56 billion cubic metre).

Currently, Petronet LNG Ltd, which imports LNG to meet the growing demand for natural gas, operates a five-MTPA capacity LNG terminal at Dahej. The capacity of this terminal is to be expanded to 10 MTPA by 2009-10. Shell's 2.5-MTPA capacity LNG terminal at Hazira was commissioned in April 2005.

Other LNG terminals under consideration are the Dabhol LNG terminal (1.2 MTPA in 2007-08 to increase to 5 MTPA in 2009-10) and LNG terminals at Kochi (2.5 MTPA in 2010-11 to increase to 5 MTPA in 2011-12) and Mangalore (1.25 MTPA by 2011-12 initially).

Source: Business Line, New Delhi
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