India's Foreign Investment Promotion Board (FIPB) has cleared, without any riders, proposals put forward by Reliance Industries Ltd. and Royal Dutch/Shell Group to set up two liquefied natural gas terminals at Hazira, Gujarat.
Reliance also is developing an LNG terminal at Jamnagar, also in Gujarat.
Surprisingly, the clearance came in the wake of an objection by India's Petroleum Ministry that these units would create direct and undesirable competition with LNG Petronet's proposed 5 million metric ton/year capacity LNG terminal at Hazira.
The ministry had, however, placed no obstacle in the way of Reliance's proposed Jamnagar terminal. This had prompted the government to defer making a decision.
In response to the Petroleum Ministry's objection, Reliance has offered to pick up any equity stake in LNG Petronet that its promoters are willing to offer.
Petronet has been floated by four public sector oil companies: Gas Authority of India Ltd., Bharat Petroleum Corp., Oil & Natural Gas Corp., and Indian Oil Corp., with each holding 12.5% equity. The remaining equity is to be offered to private sector companies and the investing public.
Reliance's offer; the knowledge that the company is setting up several power plants all over India, for which LNG will be required; and the feeling that there is a large enough market for all parties have apparently prompted FIPB to overrule the ministry's objections.
The new company being floated by Reliance will have equity capital of 30 billion rupees ($780 million, at current exchange rates), of which 11.5 billion rupees will be sold on foreign markets.
The total outlay on the Reliance projects will be 90 billion rupees, of which two-thirds will be raised through debt issues. The combined capacities of the two LNG terminals will be 10 million tons/year. Foreign investment in the project will come through a combination of private placement with strategic investors and a Euro issue of global depository receipts.
The facility planned by Shell will have a capacity of 2.77 million tons/year and have a capital cost of about $600 million.
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