By R. Sasankan

History has a strange way of repeating itself: the circumstances are different, the particulars altered. But there is a common thread that binds two disparate elements that appear to perpetuate a paradigm. It is a tale of grandiose plans, hubris and colossal extravagance.

Let me illustrate this. Around mid-1980s, The Economic Times (where I worked at that time) carried a major exclusive story. It was the first-ever report on the 1400 km HBJ gas pipeline. The pipeline started from Hazira on the west coast, traversed through Bijaipur and ended in Jagdispur (HBJ) in the state of Uttar Pradesh. The cost was estimated at Rs 1400 crore (Rs 14 billion).

The pipeline was planned mainly to transport gas from ONGC’s South Bassein field in the Bombay offshore to six fertilizer plants that were supposed to come up along the pipeline’s route. The construction contract for the pipeline was awarded to a consortium headed by Spie Capag of France which had outbid the then politically powerful Snam Progetti of Italy in the international tender. V.P. Singh, the then finance minister in the Rajiv Gandhi-led government, swiftly cleared the file thereby ensuring that Snam could not use its clout to scuttle Spie Capag’s chances of grabbing the contract. In fact, this episode soured the relations between Rajiv Gandhi and V.P. Singh and would eventually lead to their parting of ways.

The pipeline was completed in time by the contractor but it remained totally unutilised for close to five years as the fertilizer plants that were supposed to consume the gas had not been established. If the pipeline had been owned by a private company, it would have almost certainly gone bankrupt. The appalling situation arose because of the lack of coordination among the various wings of the government, mainly between the ministries of petroleum and natural gas and Chemicals and Fertilizers.

Readers may wonder what relevance this story has got now. As I said earlier, the circumstances may be different but I discern a similar situation developing as a host of companies feverishly draw up plans to build terminals for import and re-gasification of Liquefied Natural Gas (LNG) with no clear idea of whether there are consumers ready and waiting to buy the finished product.

India has six LNG re-gasification terminals in operation with a total capacity of 42.7 million tonnes per annum. Except in the case of terminals located at Dahej and Hazira in the western state of Gujarat, the capacity utilisation of the other terminals is abysmal at less than 20 per cent. In the case of Indian Oil Corporation’s terminal at Ennore, near Chennai in Tamil Nadu state, it is as low as 12 per cent.

The performance picture will be drastically different when the 5 million tonne per annum terminal at Dhamra in the state of Odisha, which is at an advanced stage of construction, comes on stream. This is because the main promoter of the terminal is the Adani group. The PSU oil companies are vying with each other to book regassification capacity in the Dharma terminal. Adani has Total of France as its co-promoter. The capacity of the terminal is expandable to 10 million tonnes per annum. It will be the second LNG import terminal to be built on India’s east coast, after the Indian Oil Corporation’s Ennore terminal which was opened in March 2019.

It is difficult to explain how or why the Dhamra terminal has bucked the trend and proved to be a success – at least on paper – even before it has started operations. This once again proves that in India, the identity of the promoter is very important – and outweighs all other considerations. At one time, Reliance Industries displayed the same sort of derring-do and were able to pull off the almost impossible with surprising ease. Somewhere, it has lost that admirable touch with the result that it has fallen off the perch.

How advisable is it to create regassification capacity when existing terminals are finding the going tough? Petronet LNG Ltd (PLL) was able to overcome the drag on its fortunes arising from the low capacity utilisation of its 5 MMTPA Kochi terminal because there was a compensating factor. Its 17.5 MTPA Dahej terminal, rated as the largest in the world in terms of capacity, has been operating at near maximum capacity. In contrast, oil major Shell, which owns the Hazira terminal in the same state of Gujarat, had to face turmoil as its terminal lay rusting in the first few years. Even now its capacity utilisation is below 50 per cent.

Petronet LNG Ltd’s 7.5 million tonne per annum LNG imported from Qatar, now raised to 8.5 million tonne, is handled by the Dahej terminal which keeps it busy throughout the year. The Kochi terminal did not even have a pipeline ready to transport regasified gas to nearby markets. For many years, the Kochi terminal capacity utilisation was below 10 per cent. PLL is virtually a PSU and its leadership does not have the aggression or imagination to match the Adanis or Reliance Industries.

Surprisingly, the record of low capacity use has not deterred others from pursuing plans to build more regasification terminals. This time, a number of private players have jumped into the fray. Petronet LNG is also planning a 4 million tonne floating LNG import terminal at Gopalpur in Odisha which will later be converted into a 5 million tonne per annum onshore terminal.

India’s first floating terminal for liquefied natural gas (LNG) at Jaigarh in Maharashtra is expected to be operational this year. Another floating terminal at Jafrabad in Gujarat is likely to begin operations this calendar year.

All of this presages a looming glut-like situation. True, India’s demand for imported natural gas is projected to go up with domestic production refusing to rise. In the absence of a transnational gas pipeline like the one which China has built to import Russian gas, India still has to depend on LNG. The initiative for building a transnational pipeline has to emerge from the political leadership, either in the gas producing or the gas importing country. Meanwhile, the LNG import lobby is gaining strength and wields enough influence to scuttle the pipeline option.

The Indian market is highly price sensitive. The recent surge in the natural gas price has dampened LNG imports. The future of these terminals depends to a large extent on the gas price as Indian consumers are extremely cost conscious. The LNG terminal owners cannot be unaware of this reality.

The HBJ pipeline was owned by the Indian government. It did not matter much when the enterprise drowned in losses. The private players cannot afford that luxury without the safety net of a bailout plan.