ONGC, IOC, BPCL may book capacity at Swan’s LNG terminal

ONGC, IOC, BPCL may book capacity at Swan’s LNG terminal

The three public sector companies — ONGC, IOC and BPCL — are actively considering booking capacities to import liquefied natural gas (LNG) with the proposed terminal built by Swan Energy at Jafrabad in Gujarat with a total capacity of 5 million tonne per annum (mtpa).

“The three PSUs are carrying out due-diligence to book 1-1.5 mtpa capacity at the proposed terminal at Jafrabad. It would be on tolling basis,” two sources privy to the development told FE.

Interestingly, these government-owned companies also hold 12.5% stake each at Petronet LNG. Petronet has two operational regasification terminals at Dahej in Gujarat, and at Kochi in Kerala. While the Dahej terminal has a nominal capacity of 10 mtpa, the Kochi terminal has a capacity of 5 mtpa. The company is in the process to build a third terminal at Gangavaram in Andhra Pradesh.

Industry watchers are wary of the fact that despite being stakeholders of Petronet (which is into business of marketing LNG), ONGC, BPCL and IOC are considering to book capacity at Swan Energy’s upcoming terminal. In addition, marketing and trading of gas is not one the core business interests of ONGC. The oil and gas explorer’s Board is likely to take up the issue this month. Meanwhile, the government wants its companies to focus on its core business rather than random diversification.

In terms of its core business of producing oil and gas, ONGC saw its standalone crude oil output falling from 24.67 million tonne in FY10 to 22.25 million tonne in FY14. Similarly, gas output has increased marginally from 23.11 billion cubic metres in FY10 to 23.28 billion cubic metres in FY14.

If Swan Energy could rent out entire capacity, it gives boost to its business model leading to banks and financial institutes willing to lend for the LNG terminal. Nikhil V Merchant, managing director of Swan Energy, told FE that the financial closure of the project is expected in the next 45 days. The LNG terminal at Jafrabad is likely to cost about R5,500 crore. Nearly, 70% of the cost would be raised through debt.

On December 16, 2013, Swan Energy informed stock exchanges that it has received environment clearance from the Centre for setting up floating storage re-gasification unit (FSRU) LNG import terminal near Pipavav in Gujarat.

The construction of the terminal is expected to begin later 2015 and the project is likely to be operational by 2018.

In 2012, India consumed 2.1 trillion cubic feet (Tcf) of natural gas. LNG imports accounted for about 29% of 2012 demand, and LNG is expected to account for an increasing portion of demand at least in the next several years as Indian energy firms attempt to reverse the country’s recent domestic production declines, said US Energy Information Administration. “Increasing LNG imports will depend on the pace of expansion in re-gasification terminal capacity and pipeline infrastructure connecting gas to markets that currently lack access,” it said.

India was the world’s fourth-largest LNG importer in 2013, following Japan, South Korea and China, and consumed almost 6% of the global market, according to data from IHS Energy.

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