Gas finds spell doom for 2 LNG ports

The recent gas discoveries in the east coast and the tight supply of liquefied natural gas (LNG) globally may see the scrapping of two proposed LNG terminals in the country together worth around Rs 7,300 crore.

"The proposed Ennore and Mangalore terminals may not come up as LNG imports may not be required due to the large domestic gas supply that is scheduled to start from next year," said a senior official in the petroleum ministry.

Four new LNG terminals were being planned in the country at a total investment of close to Rs 14,500 crore. Three of these terminals are on the west coast, while one, the Ennore terminal, is on the east coast.

Reliance Industries is slated to start pumping out gas from the Krishna-Godavari basin by mid-2008, which will subsequently almost double the availability of gas in the country. Other producers like state-owned Oil and Natural Gas Corporation and Gujarat State Petroleum Corporation too will soon start producing gas from their blocks in the KG Basin.

"Significant gas discoveries by ONGC and GSPC have put in doubt the terminals at Ennore and Mangalore," the ministry official said.

Some work has already been done on these terminals. Land allotment and fiscal incentives for the LNG regassification terminal planned by Indian Oil Corporation at Ennore in Tamil Nadu have already been worked out.

Techno-commercial feasibility studies have also found the project feasible.

IOC has also reached an "understanding" with LNG importer Petronet LNG Ltd for sourcing of gas for the proposed 2.5 million tonne per annum (mtpa) project on the east coast.

The 5 mtpa Mangalore terminal is being planned next to the oil refinery in the area. The area is being developed by Oil and Natural Gas Corporation along with its subsidiary Mangalore Refinery and Petrochemical Ltd as a hub which will house petrochemical units.

"Pipelines are being planned to carry gas from the east coast to the west coast where most of the power and fertiliser plants are located. RIL has also got permission to lay a pipeline to Chennai and Mangalore from its field in Kakinada. These have definitely impacted the viability of setting up LNG terminals," the petroleum ministry said in a report to Prime Minister's Office a few weeks back.

Apart from the improved domestic gas availability, LNG import is also turning out to be a major hurdle. Currently, India is talking to suppliers such as Libya, Algeria and Australia for importing gas. "Supply is very constrained. There are already long queues of buyers waiting to buy gas.

Moreover, the suppliers prefer to sell the gas to Europe due to better prices. That way, they also get a toe-hold in Europe," said a senior industry official.

The Kochi terminal, which is close to starting construction, has not been able to tie-up long-term LNG supplies either.