Dahej LNG Terminal Project – A Profile

Scope of the Project:

The project entails setting up of an LNG (liquefied natural gas) import and regassification terminal at Dahej in Bharuch district of Gujarat.

Project Promoters:

The promoter of the project, Petronet LNG Limited (PLL), is engaged in sourcing of LNG, development of infrastructure for regassification and utilisation of regassified LNG in India.

PLL was incorporated in April 1998. The company has been promoted by four public sector oil companies - Gas Authority of India Ltd. (GAIL), Oil & Natural Gas Corporation Ltd. (ONGC), Bharat Petroleum Corporation Ltd. (BPCL) and Indian Oil Corporation Ltd. (IOC). Ras Laffan Liquefied Natural Gas Company Ltd (RasGas), a joint venture between Qatar General Petroleum Corporation and Mobil QM Gas Inc, a subsidiary of ExxonMobil Corporation, is the supplier of LNG for the terminal. French gas company Gaz de France (GdF) is the project consultant. Both these companies hold equity stakes in the venture. The other stakeholders include the Gujarat State Government, banks and financial institutions.

The shareholding pattern in PLL is indicated below:

Cost and Funding:

The project cost is estimated at Rs.2,800 crore.

Funding is proposed to be on a debt-equity ratio of 70:30.

In December 2000, the company tied up a short-term bridge loan of Rs.1,400 crore from seven banks and financial institutions including Infrastructure Development Finance Company (IDFC), Oriental Bank of Commerce, Allahabad Bank, State Bank of Patiala, State Bank of Hyderabad, Jammu & Kashmir Bank and Indian Overseas Bank.

The bridge loan, with a two-year maturity period, carried around 11 per cent interest rate. It would be converted into long-term loan and banks would be offered equity participation for achieving financial closure.

The Asian Development Bank, ICICI, State Bank of India, Industrial Development Finance Corporation (IDFC), GIIC of Singapore and American Insurance Group (AIG) have evinced interest in picking up equity in the project. Foreign banks such as ABN Amro, Citibank, Standard Chartered, ANZ Grindlays, Deutsche Bank and Fuji Bank, are likely to extend long-term debt to the project.

Financial closure of the project is expected by December 2001.

Capacity:

The project entails setting up of an LNG regassification terminal with a capacity of 5 million tonnes per annum. It also involves construction of a 2.5 km long jetty, island break water and two storage tanks with a capacity of 1.6 lakh cubic metres each. LNG for the terminal would be sourced from Qatar. Of the total quantum of LNG imported, GAIL would market three million tonnes, while IOC and BPCL would market the remaining two million tonnes.

The terminal would mainly be utilised by the power stations of National Thermal Power Corporation Ltd, private power producers and fertiliser plants.

Completion Date:

The project is scheduled to be completed by December 2003.

Project History:

On 31 July 1999, the company entered into a 25-year agreement with RasGas for importing 7.5 million tonnes of liquefied natural gas annually. (This is inclusive of the 2.5 million tonnes required for PLL’s proposed LNG terminal at Kochi in Kerala).

Around 49 hectares of land had been acquired for the Dahej terminal by August 1999.

In October 1999, nine consortia were pre-qualified for the turnkey contract of the project. The bid package was prepared by Engineers India and finalized in consultation with ABN Amro Bank, White & Case, Ernst & Young and Gaz de France.

In November 1999, PLL signed memoranda of understanding (MoU) with Duncans Industries, SKN Industries and RPG Dholpur Power Company for supply of LNG from its terminal. Under the MoU with Duncans, Petronet would supply 1.66 million cubic meters of gas per day to Duncans’ Panki fertiliser unit in Uttar Pradesh. The MoU with SKN Industries provides for supply of 1.50 million cubic meters of gas per day for domestic and commercial users in Faridabad, Haryana. The MoU with RPG Dholpur Power is for the supply of 3 million cubic meters of gas per day to RPG’s power project at Dholpur in Rajasthan. PLL proposed to supply gas to these projects through GAIL's Hazira-Bijapur-Jagdishpur (HBJ) gas pipeline, in phases, from the latter half of 2003 onwards.

Gaz de France was appointed to assist PLL in purchase of LNG, preparation of detailed feasibility report, construction, supervision and operation of the terminal.

In January 2000, PLL was considering delinking the cost of the finance to be arranged by EPC (engineering, procurement and construction) bidders from tender evaluation criteria. The modified proposal envisaged evaluation of bids on the basis of EPC price. The company was also exploring the possibility of replacing the EPC mode of contract execution with BOOT (build-own-operate-transfer) in view of constraints faced in mobilising funds for the project.

In November 2000, PLL shortlisted two consortia, one led by Ishikawajima-Harima Heavy Industries Co. (IHI) and Japan Gas Co. (both of Japan) and the other consisting of Technigaz and Techni Mount (of France), for the EPC contract of the project. In December 2000, the Rs.1,450 crore EPC contract was awarded to the IHI-led consortium. The consortium also includes Ballast Nedam International BV of the Netherlands, Toyo Engineering India Ltd., Itochu Corpn. and Mitsui Co.

PLL selected Foster Wheeler Energy Corpn. as the project management consultant. The company would be responsible for regular review and monitoring of the project. GAIL was awarded the marketing and supply contract in association with IOC, while ONGC was likely to bag the operations and maintenance contract for the project.