Adani eyes LPG market in eastern India, Bangladesh through 1.6-mt Dhamra import terminal

Adani Gas Ltd (AGL), the natural gas distribution arm of Adani Enterprises, is eyeing the growing market for cooking gas in eastern India and Bangladesh and has proposed to set up a 650-km pipeline network that will connect the Adani Group's planned 1.6-million tonne (mt) liquefied petroleum gas (LPG) terminal at Dhamra port in Odisha to Asansol in West Bengal and Duttapulia near the Indo-Bangladesh border.

The company has submitted an Expression of Interest to the Petroleum and Natural Gas Regulatory Board (PNGRB) seeking authorisation for laying the pipeline. "The import terminal will be operational by mid-2018. The initial volume is expected to be approximately 1.6 mt per annum (mtpa) which will be subsequently increased to 2.5 mtpa in the subsequent phase," AGL has said in its application.

An email sent to the company remained unanswered. Experts, however, said setting up an LPG import terminal of 1.6 mtpa capacity might entail an investment of close to Rs 1,500 crore.

The proposed pipeline from Dhamra Port to Asansol and the Duttapulia pipeline would help evacuate cargo from the upcoming LPG terminal and increase the penetration of LPG in the under-serviced markets of Odisha, West Bengal, Jharkhand and Bihar. AGL has been operating city gas distribution (CGD) networks in Vadodara and Ahmedabad since 2004 and Faridabad since 2009.

The company also holds a 50:60 joint venture with Indian Oil Corporation (IOC) authorised by PNGRB to develop and operate CGD networks in Allahabad, Chandigarh, Panipat, Daman, Ernakulam and Dharwad. AGL services a customer base of around 350,000 daily through a network of 65 CNG stations, 400 km of steel pipeline and 5,850 km of medium density polyethylene pipeline.

According to the company, the availability of draft and the infrastructure for handling very large gas carriers were a major consideration for selecting the location of the import terminal at Dhamra port. India consumes around 18 mt of LPG annually even as domestic production stands at 10 mt. The country imports 8.3 mt of LPG a year. LPG consumption is expected to grow to 25 mt in 2020, of which nearly 16 mt will be imported.

Experts say planning for expansion of gas supply in eastern India makes business sense in view of the government's latest focus on increasing LPG penetration. "Most of the 50 million new LPG connections being given under the Ujjwala Yojana will go to these states. That is why the entire region is poised for a 40-50 per cent jump in consumption year-on-year. This is why it makes business sense to set up and expand gas supply infrastructure in the region," said Debasish Mishra, senior director at Deloitte.

LPG consumption in the Dhamra hinterland has also grown to 2.8 mtpa driven by a sharp rise in demand in West Bengal, Odisha, Jharkhand, Bihar, Chhattisgarh, Bangladesh and the north-eastern regions of India.

Bangladesh's LPG supply is also heavily import-dependent. That nation consumed 150,000 tonne of LPG last year, of which only 22,000 was produced locally.

Apart from the LPG terminal, Adani Group is also planning to set up a liquefied natural gas (LNG) import terminal at Dhamra. The group has reportedly offered 49 per cent stake in its Rs 5,000-crore LNG import terminal to state-run gas utility GAIL and petroleum refiner IOC.