India seeking LNG

Qatar is expected to supply 2.1 million tonnes per year of LNG from December to fire the mothballed Dabhol power plant, a top Indian official said.

Petronet India Ltd is negotiating with RasGas of Qatar for gas supplies for the Dabhol plant. Built by Enron, the plant is now controlled by Ratnagiri Gas and Power Pvt Ltd. - owned by gas transmission firm GAIL (India) Ltd and the National Thermal Power Corp Ltd.
?Negotiations between Petronet and RasGas of Qatar are proceeding well. Ratnagiri is confident of getting 2.1 million tonnes per year of LNG, which is adequate to run all its turbines,? Petroleum Secretary M S Srinivasan said.

He said LNG supplies for the project had been firmed up for two and a half years.
Petronet, which set up India?s first LNG terminal at Dahej in the western Indian state of Gujarat, would import the gas but Royal Dutch Shell?s terminal at Hazira in the same state would also be used to import LNG, officials say.

GAIL said it had signed an agreement with Royal Dutch Shell to use the oil major?s facilities to import LNG. ?GAIL has an agreement with Shell for using a part of their regasification capacity at Hazira as a tolling facility and would use the terminal as and when GAIL imports LNG,? a company spokeswoman said.

She said LNG would be supplied to Dabhol after pipelines connecting the import facilities to the power plant were built by December. The $2.9-billion Dabhol project was shut down in May 2001 after a billing dispute with its sole customer, the state-run Maharashtra State Electricity Board.

At the time of closure, the plant?s operational first phase - capable of generating 744 megawatts (MW) of electricity out of a total target of 2,184 MW - was being fuelled by naphtha, while the second phase was nearing completion.

Analysts say Dabhol is not expected to ease India?s power situation as the country has a poor distribution network, with widespread theft of electricity and large subsidies that distort the market.

Dabhol had been designed to eventually use gas and has affiliated facilities to import LNG. Petronet recently also finalised the sale and purchase agreement for an additional 2.5 million tpy from RasGas on a long-term basis with deliveries starting in mid-2009, also for the Dahej terminal.

Meanwhile, Qatar is keen to participate in India?s infrastructure development, especially in power and desalination projects, in which it holds considerable expertise.
Keen to step up engagement with the gas-rich country, India too has proposed various options to woo investments from Qatar in the form of equity participation, official sources said.

Petroleum Minister Murli Deora discussed many of these ideas with First Deputy Premier and Minister of Foreign Affairs Sheikh Hamad bin Jassim bin Jabr Al Thani and Energy Minister Abdullah bin Hamad Al Attiyah during his visit to Doha to attend the International Energy Agency (IEA) meet.

?Qatar has evinced interest in investment in energy-related infrastructure projects in India, including equity participation in projects like Petronet LNG in which it is involved,? a senior petroleum ministry official said.

Though Qatar?s RasGas has not taken any stake in Petronet LNG due to unresolved issues about the quantum of stake, the Indian company has paved the way for offering an equity stake through plans for expansion of its equity base.

India?s largest LNG importer, Petronet LNG, decided to raise $100 million through issue of foreign currency convertible bonds (FCCB) in June-July. This would lead to a 7.5 per cent drop in the shareholding of state-owned energy majors including the Oil and Natural Gas Corporation, GAIL (India) Ltd, the Indian Oil Corporation and the Bharat Petroleum Corporation.

The funds raised through the bonds are earmarked for part financing Petronet LNG?s second terminal at Kochi. At the annual general meeting on June 14, the company board of directors is expected to take a decision making the bonds fully convertible into equity shares within five years of the issue, said Petronet LNG managing director and CEO P Dasgupta. On the possibility of RasGas being offered equity stake in the expanded equity base, Dasgupta said, ?They are our strategic partners and will be given the first right of refusal.?

Moreover, Qatar?s participation in the state-run thermal power major NTPC?s Kayamkulam power project is being mulled. ?It is proposed to raise the generation capacity of the Kayamkulam project to 2,000 MW through a new company which will open it up for foreign investment. In case the Qatar Electricity and Water Company (QEWC) decides to take equity participation in the project after it has been valued, it could help us get dedicated gas from Qatar,? an official said.

India has sought additional gas supplies from Qatar, which has so far committed to supplying 7.5 million tonnes to Petronet LNG for its Dahej terminal in Gujarat and the upcoming terminal at Kochi. In addition, Qatar has agreed to supply additional 2.2 million tonnes of LNG as a stopgap arrangement for two-and-a-half years for the operation of Maharashtra?s Ratnagiri power project, formerly known as the Dabhol project.

Apart from the two energy projects, Qatar has evinced interest in providing technical know-how and investment to set up industrial desalination plants, something that has been engaging the attention of planners in the southern states facing acute shortage of water. Qatar?s participation in industrial conglomerates developing special economic zones would be welcome as it would help to give a boost to industrial ventures by ensuring dedicated supply of water, making the projects more attractive, said official sources.

Talks initiated by Deora were being followed up for quick decisions on investment flows from Qatar. Also being studied was possible collaboration in petroleum and refinery projects, the sources added.

Source:, New Delhi, June 4, 2006
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