Reliance Power, Shell Planning LNG Terminal

Reliance Power and Shell are in talks to jointly set up east-coast LNG terminal to fuel factories and power plants that are eyeing imports as output from the D6 block has fallen sharply, Economic Times reported Tuesday.

Several other companies, including Petronet LNG, the country's biggest gas importer, are considering setting up a terminal on the east coast.

Power projects with a total capacity of about 7,000 mw, including Reliance Power's Samalkot project, would be stranded due to gas scarcity, as local gas is scarce and importing LNG from existing facilities on the west coast is not economically viable.

Shell and Reliance Power were keen to set up an equal joint venture for an LNG terminal at Kakinada. The development comes two months after Mukesh Ambani-promoted Reliance Industries and oil major BP incorporated their equal joint venture, India Gas Solutions, for global sourcing and marketing of natural gas in India.

Shell operates an LNG terminal on the west coast in Hazira, Gujarat, which it set up with an initial capacity of 2.5 million tonnes per annum (mtpa). Its capacity is being increased to 5 mtpa, but the additional capacity cannot be used by customers on the east coast because of high transportation charges and local taxes.

Meanwhile the paper also reported that Kakinada Port may pick up a minority stake in the proposed JV.

A government report in August had estimated that domestic gas output would rise to 199 million metric standard cubic meters per day by 2016-17 from about 145 mmscmd now. According to an estimate by the oil ministry, natural gas demand from fertiliser, power, city gas distribution, petrochemical, refinery and steel sectors would cross 341 mmscmd by 2014-15.