IOC's LNG project at Ennore put on hold

Indian Oil Corporation's proposed 2.5-million-tonne per annum liquefied natural gas (LNG) regassification terminal project at Ennore in Tamil Nadu has been put on hold.

The reason: the company feels that the recent gas discoveries on the country's east coast will make the terminal unviable.

"The terminal project has been put on hold in view of the huge domestic gas discoveries and the potential for more discoveries on the east coast," IOC's business development director BM Bansal said.

The terminal was expected to cost Rs 2,000 crore.

Reliance Industries, Oil and Natural Gas Corporation (ONGC) and Gujarat State Petroleum Corporation (GSPC) have recently discovered a significant amount of gas in the Krishna-Godavari, Mahanadi and Cauvery sedimentary basins on the east coast.

Reliance's K-G basin discovery is scheduled to produce 80 million cubic metres per day (mcmd) of gas at its peak period. This has the potential to wipe out the current demand-supply gap in the country.

Though the potential of both ONGC's and GSPC's K-G block reserves has been downgraded to around 2 trillion cubic feet (tcf) from earlier estimates of around 20 tcf, the companies maintain that the upside potential of the blocks is huge.

"Right now, we have 80 mcmd of gas from the K-G basin. In times ahead, this could go up to even 250-300 mcmd," an official of a leading oil and gas exploration company said.

Although the working committee for the Eleventh Five Year Plan has projected that the demand for gas will outstrip supply by close to 90 mcmd in 2012, the industry is of the view that the country could become a gas surplus country in the next decade.

There are currently two LNG terminals in the country "� Petronet LNG's 6.5 mtpa terminal at Dahej in Gujarat and Shell's 2.5 mtpa terminal at Hazira in Gujarat.

Another 5 mtpa terminal is coming up at Dabhol in Maharashtra. All of these are on the west coast. Petronet LNG is also constructing an LNG terminal at Kochi.

"The Ennore LNG terminal may have been feasible if the Iran LNG deal had worked out. We would definitely have gone ahead with the project in that case," Bansal said.

In June 2005, the National Iranian Gas Export Company and IOC, GAIL, and Bharat Petroleum signed a $22 billion deal to import 5 mtpa of LNG to India for a 25-year period starting 2009.

The deal has since hit a roadblock with Iran asking for $4.78 per million British thermal unit of gas, while India is not willing to pay more than the contracted $3.215 per mBtu.

The LNG terminal was being jointly promoted by IOC and its subsidiary Chennai Petroleum. GAIL was also expected to invest in the project and handle the marketing and distribution of regassified LNG.