IOC plans second LNG terminal on east coast
New Delhi   29-Aug-2011

IndianOil (IOC) mulls setting up its second five million tonnes per annum liquefied natural gas (LNG) terminal on east coast. The public sector refiner is in talks with global LNG suppliers such as Gazprom, RasGas and ExxonMobil to secure natural gas supplies for its two terminals.

“We are actively working for setting up an LNG terminal on east coast,” IOC’s director for planning and business development, AMK Sinha, said in an interview.

The company is carrying out initial studies, but yet to finalise a location for the terminal, Sinha said. According to the plan, IOC may start work on the terminal by 2013.

At present, IOC is setting up its first LNG terminal at Ennore. The first five million tonnes per annum terminal would cost the refiner nearly Rs 4,500 crore. The terminal is expected to be operational by 2014-15.

The maharatna firm has decided to set up a second terminal, considering the natural gas requirement for IOC’s three refineries in Haldia, Paradeep and Barauni. “The three refineries would have natural gas demand of 2.5 million tonnes per annum. We would first source gas for our own consumption and additional volumes may be sold to others,” said Sinha.

The company expects to boost its gross refining margins (GRM) by using natural gas as feedstock. Talking about sourcing of gas, Sinha said the company is still monitoring price volatility in the global gas market. After the Fukushima Daiichi nuclear disaster in Japan, high volumes of LNG cargos have been diverted to the region, which has led to firming up of gas prices.

“At present, prices (LNG) are very high, and long-term contracts vary from 15-20 years or even more. We are studying whether sealing such a term deal at current prices would be beneficial in the long term. We may go for some short-term supplies if prices remain high,” he said. Ernst & Young said in a report that the government is increasingly encouraging development of gas infrastructure and unconventional hydrocarbon sources such as deep water and coal-bed methane to reduce its dependence on oil imports. It is encouraging the development of LNG terminals and gas pipelines in the country.

Petronet LNG, has also announced plans to invest nearly $1 billion on a five million tonnes LNG terminal in the east coast.