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 per cent 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,” A K Balyan, chief executive officer and managing director of Petronet, told Business Standard.
Referring to the interest-free advance, he added: “The advance will be enough to take care of our equity portion of 30 per cent in the Dahej expansion project.”
With gas demand expected to grow 14 per cent in the next five years, Gail, which owns 12.5 per cent 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 LP's 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.