New Delhi: Petronet LNG Ltd, the nation's largest liquefied natural gas importer, has leased out 2.25 million tonnes per annum capacity at its Dahej terminal in Gujarat to Gujarat State Petroleum Corp (GSPC).
"GSPC yesterday signed an agreement to book a capacity of 2.25 million tons on a long-term and firm basis," Petronet CEO & Managing Director A K Balyan said.
While a part of this capacity will be made available from Dahej terminal's existing 10 million tonnes capacity, the rest will be from the expanded capacity, he said.
Dahej is being expanded to 15 million tons per annum by the 1st quarter of 2016.
GSPC supplies gas to household and industrial consumers in Gujarat. With stagnant domestic output, the company to increasingly by imported LNG from Petronet and Royal Dutch Shell, which operates the only other operating LNG import facility in the country.
Petronet will earn a tolling and regassification charge from leasing out the facility to GSPC, which has its own plans to build a LNG import facility.
"It's a use or pay agreement," Balyan said.
GSPC will have either import 2.25 million tonnes of LNG annually or pay for usage charges.
The agreement was signed by Balyan and GSPC Managing Director Tapan Ray in Dahej yesterday.
Petronet is also building a 5-million tons a year plant at Kochi in Kerala.
Previously, Petronet had allowed state-owned gas firm GAIL (India)to use annually 2.5 million tons capacity at Dahej terminal for importing LNG.
GAIL, which owns 12.5 percent in Petronet, had under-written the expansion Petronet is doing of the Dahej terminal from 10 million tonnes to 15 million tonne by 2016.
GAIL had recently struck a 20-year deal with Russia's Gazprom to buy 2.5 million tons of LNG but it does not operate an LNG terminal. It will begin receiving supplies from Gazprom in 2018-19.
In December 2011, GAIL had signed an agreement to buy 3.5 million tonnes of LNG a year for 20 years from Houston-based Cheniere Energy Partners LP's Sabine Pass terminal in western Cameron Parish, Louisiana.
In August last year, it signed an agreement with GDF Suez to buy 12 cargoes of LNG or about 0.8 million tonnes of the fuel from 2013 to 2014.
Fall in output at Reliance Industries' eastern offshore KG-D6 fields and inability of state-run Oil and Natural Gas Corp (ONGC) to raise production has led to increased reliance on imported gas in its liquid form (LNG).
Petronet owns the first and the largest LNG receiving, storage and re-gasification terminal in India at Dahej in Gujarat.
The plant was commissioned in the year 2004 with a nameplate capacity of 5 million tonnes which was later expanded to 10 million tonnes. Its second plant at Kochi with a capacity of 5 million tonnes is expected to be commissioned in the next few months.
Petronet is also planning to set up its third terminal at Gangavaram in the state of Andhra Pradesh with a name plate capacity of 5 million tonnes, which will also try to bring gas early to the state by establishing an FSRU till the land-based terminal is ready.
Balyan said these agreements are historic since it is the first time in India that any company has provided a long-term capacity to a user for a 20-year term on a firm basis.
While this will provide assurance of revenues to Petronet, GSPC/GAIL will gain from an assurance of capacity.
"GSPC will now be able to tie-up LNG on a long-term basis in the international markets and serve its customers with an assured supply of gas for a longer tenure," Ray said.
Petronet and GSPC will also explore possibility of connecting the proposed Gangavaram Terminal with the Mallavaram-Bhilwara pipeline being built by a consortium led by GSPL as also cooperating in the area of supplying CNG to cater to the demands of the transport sector.