Policy
Crude Oil price: Shape Of Things To Come
more...


RIL Outsmarts PSU Oil Cos, Reaches Out To Cheap Canadian Oil
more...


India Fails To Reduce Dependency On Crude Oil Imports
more...


GAIL Plans To Double Its LNG Trading Volumes By 2030
more...


India’s Petroleum Products Export Facing Stagnation?
more...

Regulation
Expanding PNG May Lead To Lower LPG Imports
more...


When Will India’s Refining Capacity Expansion Be Revived?
more...


Oil India Getting Ready For Exploration in Offshore Kollam
more...


BPCL Leapfrogs Into PetroChemicals Production
more...

Alternative Energy / Fuel
Impressive Growth In Wind Energy
more...

New Projects
Chennai Petroleum Sees Two-Year Delay In Building 180,000 Bpd Refinery
more...


Lummus To Provide Digital Solutions To Haldia Petrochemical
more...

Market Watch
India’s Natural Gas Consumption Reaches 66.6 BCM In 2024
more...

Companies
Beicip-Franlab
more...


Adani Green Energy Secures $400 Million Funding For Its 750 MW Solar Projects
more...


Government Accords ‘Navratna’ Status to IREDA
more...


HPCL To Establish International Trading Desk
more...


Newbuild Offshore Anchor-Handling Tugs Launched In India
more...


NHPC To Collaborate With Norwegian Company For Implementation Of Floating Solar Energy Technology
more...

Press Release [FREE Access]
Petro Intelligence » The Lost Terminals: Writing On The Wall That No One Seems To See

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.



To download the latest issue 'Volume 31 Issue 3 - May 10, 2024', click here
Petro Intelligence [FREE Access]
Natural Gas: Still Dreaming Big
more...

Crude Imports: The High Stakes In A Game Of Russian Roulette
more...

Sweet Factor Blunts Appeal Of US Crudes
more...

Greatest Uncertainty Faced By The International Oil Industry
more...

Foreign Investment
JERA’s Subsidiary In India Begins Operations
more...

Overseas Investment
Oil PSUs’ Output From Overseas Fields Up
more...

Gas Scene
Compressed Bio Gas Development In India
more...


Coal Bed Methane (CBM) gas development in India
more...


Natural Gas Pipeline Network In India
more...


India’s Rising LPG Consumption
more...


Break-Up Of R-LNG, Domestic Gas Consumed by Major sectors Of Indian Economy
more...


Price Factor Influencing Gas Import Dependency
more...


Domestic Natural Gas Scene in FY 2023-24
more...


Sectoral Consumption of Natural Gas (Qty in MMSCM) in February 2024
more...


Domestic Natural Gas Scene Presents A Bright Picture In February 2024
more...


Sector-wise Consumption Of Natural Gas
more...


Higher LNG Imports Elevate Natural Gas Consumption Level in January 2024
more...


Near Total LPG Penetration Achieved
more...


India’s Fluctuating Gas Import Dependency
more...


Gas Transportation Major GAIL’s Physical Performance
more...


Growing CGD Sales In India
more...


Domestic Natural Gas Scene In December: Targets Elude, Production, Consumption More
more...


India’s LNG Import: Import Quantity Shrinks As Prices Go Up
more...


India’s LNG Import Picks Up As Market Prices Fall
more...


Sectoral Consumption Of Natural Gas
more...


Production Targets Confuse Domestic Natural Gas Scene In November
more...

Data Section
Monthly Upstream Data
Monthly Downstream Data
Historical database
Data Archives
Special Database
Petroleum Sector Retains Top Position As Revenue Contributor To Union and State Govts
more...


India’s Widening Petroleum Industry Marketing Infrastructure
more...


How Prices Moved In Indian Crude Basket In April 2024?
more...


Crude Processing Targets, Actual performance
more...


Share of High Sulphur Crude In Processing Goes Up Sharply
more...


Production And Consumption Of Petroleum Products In FY ’24
more...


Crude Oil Import Value Comes Down In FY ‘24
more...


Ethanol Blending With Petrol Program slows After Touching All Time High
more...


Stagnating Domestic Crude Oil Production
more...


Distillate Production In Indian Refineries
more...


World-Wide Active Rig Count
more...


Estimated Consumption Of Petroleum Products in FY ‘25
more...


Petroleum Products Consumption Trend In FY ’24
more...


Shrinking Domestic Share In Petroleum Products Consumed
more...


Impressive Growth In Petroleum Products Consumption in FY 24
more...


Actual Capital expenditure of PSU oil companies In FY 2023-24
more...


India’s Crude Oil Import Marginally Down In FY 2023-24?
more...


How Does BPCL’s Marketing Operations And Efficiencies Compare With Other OMCs’?
more...


OVL’s global footprints, operations and contribution
more...

Tenders [FREE Access]
PetronetLNG
more...