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Richa Mishra

New Delhi, Aug. 26 Indian Oil Corporation Ltd (IOC) is likely to rope in Petronet LNG Ltd (PLL) as partner for its proposed liquefied natural gas (LNG) import and re-gasification terminal at Ennore, Tamil Nadu.

The IOC board is expected to consider the proposal on Monday. Subsequent to the Board approval, a memorandum of understanding (MoU) between the two entities is expected to be inked, sources said.

Sources told Business Line that bringing PLL into the project would help in sourcing LNG. Non-availability of LNG under long-term contracts has been a major deciding factor in such projects, the sources added. In fact, IOC has also been pursuing various LNG suppliers for long-term supply.

Only after an umbrella MoU is inked will the two companies define the exact role of each other in the project, sources said. While the companies remained tight-lipped on the proposal, indications are that besides the LNG terminal project, PLL would look for a larger role in its joint venture with IOC, including certain downstream activities in related areas.

The terminal is expected to cost around Rs 3,500 crore with proposed capacity of 2.5 million tonnes (mt) per annum. Subsequently, the capacity was to be increased to 5 mt per annum. The project is being jointly promoted by IOC and its subsidiary Chennai Petroleum Corporation Ltd (CPCL).

Currently, there are two LNG terminals in the country, PLL’s 6.5-mt-per-annum terminal at Dahej, Gujarat, and Shell’s 2.5-mt-per-annum Hazira terminal. Another 5-mt-per-annum terminal which is coming up is the Dabhol terminal. Petronet is also constructing an LNG terminal in Kochi.

One of the sources of natural gas is LNG, which is imported in liquefied form and then re-gasified before use. The working group on Petroleum and Natural Gas Sector for the Eleventh Plan has projected a demand of natural gas for 2007-08 at 179.17 million standard cubic metre per day (mscmd).

The average availability of natural gas in the country in 2006-07 was around 96 mscmd, including 23 mscmd of re-gasified LNG. The shortfall in demand and supply is met by import of LNG. During 2006-07, about 6.95 mt of LNG was imported which is equivalent to about 23 mscmd of re-gasified LNG.

To bridge the gap between demand and supply for the domestic market, import of gas as LNG is required and this needs additional LNG infrastructure.

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