GAIL mulls acquisition of Dabhol LNG terminal

India's state-owned GAIL (India) Ltd. is expected to acquire the inactive, 5 million tonne/year Dabhol LNG terminal in India's southern Maharashtra state. The beleaguered terminal was a project of failed US company Enron Corp.'s Ratnagiri Gas & Power Pvt. Ltd. unit.

Shirish Nadkarni
OGJ Correspondent

MUMBAI, Mar. 27 -- India's state-owned GAIL (India) Ltd. is expected to acquire the inactive, 5 million tonne/year Dabhol LNG terminal in India's southern Maharashtra state. The beleaguered terminal was a project of failed US company Enron Corp.'s Ratnagiri Gas & Power Pvt. Ltd. unit.

Maharashtra state needs for the Dabhol project to be revived because the state's power crisis is expected to soon affect the state capital Mumbai.

A 2,150-Mw power plant, the LNG terminal, and regasification facilities comprise Ratnagiri Gas's Dabhol site. However the terminal will require an additional $113 million for completion. With the cost of its revival escalating daily, the central government is forced to consider selling the terminal to another company that can activate it.

GAIL, which holds a 28.33% equity in Ratnagiri Gas, would be given first right of refusal if the terminal is sold, said Petroleum and Natural Gas minister Murli Deora.

"Hiving off of the Dabhol LNG terminal is one of the options being considered at the highest level of the government," said GAIL's chairman and managing director U.D. Choubey. "Our board will meet next week to decide on the proposal for acquiring the terminal. So far, no decision has been taken since it involves an investment of 5 billion rupees, and only the board can take a call on it."

Several other large energy companies also have shown interest in acquiring the Dabhol terminal, but the Empowered Group of Ministers for revival of the Dabhol project has been leaning towards GAIL and has stressed that there must be a long-term commitment for gas supply.

"We are negotiating with Reliance Industries Ltd. for procuring gas from its Krishna Godavari basin gas field," said Choubey. "A six-member team from GAIL and RIL has been put in place to work out a solution and will hold its first meeting soon. We will make sure that the plant will not be starved of gas any more."

GAIL and Reliance are also to work out logistics for transporting gas through the pipelines of the public sector company from the various gas sources that Reliance has in the Krishna-Godavari and Mahanadi basins. The two companies also will work out long-term gas supply and distribution arrangements.

Of the total LNG capacity at the Dabhol terminal, about 2.9 million tonnes/year would be sold as merchant sales, and the balance would be supplied to the Dabhol power plant.

Choubey said GAIL was hopeful the plant would run at full capacity by May 27.

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