• IOC, GAIL pact to take stake in Adani’s Dhamra LNG project expires, no investment made: Dharmendra Pradhan

    State-owned refiner Indian Oil Corp (IOC) and gas utility GAIL India Ltd’s initial agreement to buy a 50 percent stake in Adani Group’s Rs 50 billion Dhamra LNG project in Odisha has expired, Oil Minister Dharmendra Pradhan said on July 8. IOC and GAIL had on September 21, 2016, signed a “non-binding MoU” with Adani Petroleum Terminal Pvt Ltd to take 39 percent and 11 percent stake respectively in the planned 5 million tonnes a year liquefied natural gas (LNG) import terminal at Dhamra, he said in a written reply to the Lok Sabha.

    The MoU was “subject to management approvals of IOC and GAIL and successful negotiation of the respective regasification agreements,” he said. “The MoU has expired on September 20, 2018.”
    “Further GAIL and IOC have informed that no capital expenditure has been made by them on this project,” he said without saying if the two firms have altogether scrapped the plan to buy a stake in the Dhamra LNG project or they continue to be in dialogue with the Adani Group. He also did not give reasons for the expiry of the MoU.

    Adani Petroleum Terminal Pvt Ltd was to hold the remaining 50 percent stake. IOC had in 2015 signed up to use 60 percent of the terminal capacity for importing gas for its refineries at Haldia in West Bengal and Paradip in Odisha. GAIL too had signed up for 1.5 million tonnes of the terminal’s regasification capacity. The MoU for taking an equity stake in the Adani terminal followed GAIL dropping plans in March 2015 to set up a floating LNG import terminal at Paradip. IOC too had in 2012 signed an MoU with Dhamra LNG Port Corp Ltd (DPCL) to develop an LNG terminal at the port.

    After shelving their respective plans, the firms signed a pact with Dhamra LNG Terminal Pvt, a firm owned by Adani Enterprises. “GAIL has informed that in September 2012, GAIL engaged a consultant to undertake a feasibility study for exploring the possibility of setting up Floating Storage & Re-gasification Unit (FSRU) project(s) in upper part of the east coast of India which would facilitate development of natural gas market in eastern part of India,” Pradhan said. The consultant shortlisted two locations – one falling near Dhamra port and the other close to Paradip port in Odisha.

    “Before finalising the location, it was decided to have consultations with Indian Ports Association and Government of Odisha. Meanwhile, Paradip Port Trust also approached GAIL and expressed their interest in the establishment of the LNG regasification terminal in the Paradip Port water. “Accordingly, GAIL entered into an MoU with Paradip Port Trust on October 26, 2013, for a period of three years. However, during the meeting held in March 2015, it was discussed that as gas demand in the eastern part of the country would take some time to mature, setting up of two competing LNG terminals at the same time in such close proximity would not be commercially viable on a standalone basis,” he added.

    While GAIL has dropped plans of a 4 million tonnes project at Paradip, Petronet LNG – a firm in which GAIL and IOC are promoters, has shelved plans to set up a 5 million tonnes a year LNG import facility at Gangavaram in Andhra Pradesh. GAIL, along with GdF and Shell, had proposed a 3.5 million tonnes floating LNG terminal at Kakinada while IOC has freshly built a 5 million tonnes facility at Ennore in Tamil Nadu. Real estate player Hiranandani Group is looking to set up a Rs 24 billion, 4 million tonnes floating LNG import terminal off Haldia in West Bengal. In the October 2013 MoU, the Paradip Port Trust was to invest Rs 6.50 billion in breakwater and dredging and GAIL was to invest Rs 24.58 billion for the 4 million tonnes terminal which could be expanded to 10 million tonnes.

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