Gail arm to invest Rs 3,000 cr in Dabhol terminal to double

Team Udayavani, Apr 2, 2018, 4:26 PM IST

Dabhol (Maha): The newly-created arm of state-run gas major Gail India, Konkan LNG, will pump in around Rs 3,000 crore to double the capacity at its liquefied natural gas (LNG) terminal at Dabhol in the Konkan region of Maharashtra to 10 million tonne over the next three years.

Konkan LNG, a 100 per cent subsidiary of Gail, had on March 30 received the first 1.2 lakh tonne shipment of the 5.8-mt LNG contracted from the first-ever long-term agreement with the US signed way back in 2011 and 2013.

“We will be investing around Rs 3,000 crore in Dabhol terminal to increase its capacity to 10 million tonne from the present 5 mt, which is also underutilised now due to the terminal not being an all-weather facility.

“So, to make the Dabhol terminal an all-season facility, first we will invest around Rs 700 crore to complete the abandoned and semi-finished breakwater. Rest of the investment will go into capacity expansion,” Gail chairman and managing director BC Tripathi said.

Gail created Konkan LNG recently after demerging it from Ratnagiri Gas & Power, which is a three-way joint venture it has with NTPC and Maharashtra SEB. The JV was created to run Dabhol Power which was abandoned by Enron Corporation early 2000 following its global bankruptcy.

The entire project will take around three years to complete, and will be executed by Konkan LNG, Tripathi said, adding the work on the breakwater should be begin shortly.

Currently the terminal can operate only about eight months in a year due to not having a breakwater.

“We’ve finalised the tender for the breakwater which will be floated very soon and hope to begin work before the monsoons at the earliest or soon after the monsoons,” petroleum and natural gas minister Dharmendra Pradhan said here on Friday receiving the first shipment of 1.2 lakh tonne LNG from the US.

Gail commissioned the Dabhol terminal in 2013 and the US vessel was the 78th berthing, Tripathi said.

The company will get 22-24 shipments per annum till the breakwater is built. Once that is done the annual intake will be 80-90 ships.

It had in 2011 and 2013 entered into two contracts of 20 years each, to lift 5.8 mt of LNG from the US, which is valued at around USD 32 billion. The gas will come the Dominion Cove Point project in Maryland (signed in 2011) and the Sabine Pass project in Louisiana (agreement signed 2013) from the US.

The under-construction breakwater at the Dabhol terminal, was created in FY07 by the original Dabhol power plant promoter Enron Corporation which went bankrupt following which it abandoned the 1,200-mw power plant.

The minister had claimed that the country could negotiate “a very competitive price from the US which offers one of the best prices of LNG,” without disclosing the average price of the maiden shipment.

“Pricing is a commercial matter that cannot be publicly discussed. All I can assure you is that we have managed one of the best prices which should help the end-consumers,” he told PTI, adding industrial and residential customers in Karnataka, Maharashtra and Gujarat.

But it can be noted that when the first shipment was loaded, the crude was trading over USD 81 a barrel, and on the day it arrived it was ruling under USD 70 a barrel. Crude and LNG prices are linked.

Pradhan also said the beginning of the oil and gas shipments from the US will boost Indo-US trade and has the potential to raise it by USD 2-3 billion annually, considering massive spike in energy demand, making the country third largest in the world.

Indo-US trade has been rising 11.4 per cent on average annually since 2000 when it had stood at a USD 20 billion and crossed USD 126 billion in 2017.

It can be noted that Asia is the largest consumer of LNG in the world with around 70 per cent of consumption led by Japan, China and India.

“Once this pipeline delivery begins, this will connect the state-run gas major’s Kochi-Kuttanad- Mangalore-Bengaluru pipeline,” Gail said.

Describing the arrival of the first shipment and the conclusion of the long-term contract with the US-based Cheniere Inc as “a new beginning in the Indo-US energy partnership and trade,” Pradhan said LNG supplies is linked to the Henry Hub index contract and also “will help achieve the vision of moving towards a gas-based economy”.

The charter-hired vessel MV Meridian Spirit arrived at the Dabhol facility on March 30 after sailing for 24 days.