India's third LNG terminal at Dabhol in Oct

India is all set to get its third LNG (Liquefied Natural Gas) import terminal commissioned this October at Dabhol on Maharashtra's west coast.

The Rs 3,000 crore (Rs 30 billion) terminal - accounting for around 25 per cent of the overall cost of the much-reported Dabhol power project - was initially meant to feed the adjoining generation plant.

"The LNG terminal will be commissioned in October. There has been some delay due to bad weather conditions," said a senior official from Ratnagiri Gas and Power Pvt Ltd, renamed from Dabhol Power Company, which owns the LNG terminal and the power plant. It was orginally to be commissioned in March.

The official said gas from the terminal will not be used to run the Dabhol power plant and would be supplied entirely to other domestic companies.The power plant has already been allocated 2.7 million metric standard cubic meters per day (mmscmd) of gas supply from the Reliance Industries' block in the Krishna-Godavari basin. This supply - an agreement for which was inked by the company earlier this month - is likely to commence shortly.

An earlier proposal of hiving off the Dabhol LNG terminal was turned down by the government last year, as the proposal faced opposition from NTPC Ltd and Gail, which hold 28 per cent equity share each in the Dabhol power project.

The terminal, with an LNG regassification capacity of 5 million tonnes per annum, forms a part of the integrated Dabhol Power Project owned by RGPPL. The terminal will however become fully operational only after completion of the breakwater facilities in 2011.

Construction of the terminal was abandoned in June 2001, when the Dabhol project - formerly owned by US energy major, Enron - ran into contractual problems. The government had later asked RGPPL to revive the project and all of its facilities, including the LNG terminal.

Officials at RGPPL say the terminal would lead to a revenue of at least Rs 150 crore (Rs 1.5 billion) annually for the company at the current market price for LNG regassification, even if it processes only a million tonnes, a fifth of its total capacity, of LNG initially.

"We would invite expression of interest (EoI) from companies to decide suitable prices for providing the regassification facility through our terminal," said the official. Currently, the market price for LNG regassification is benchmarked between 60-70 cents per million British thermal units.

India has two LNG terminals currently, of about 8 mmbtu total capacity, operational at Dahej and Hazira in Gujarat. The Dahej terminal set up by Petronet LNG Ltd - a joint venture of state energy firms - has a total capacity of over 5 mbtu, while the Hazira terminal set up by Shell has a regassification capacity of about 2.5 mbtu. n addition, two more LNG terminals are planned to be set up at Kochi and Pipavav.

The LNG terminal would supplement gas supply in the country. Demand, at 170 mmscmd of gas, is more than double the supply.

Experts feel the third LNG terminal will lead to huge benefits for the fertilizer and petrochemical companies. "There is a huge demand for gas, particularly at the west coast. The facility will especially benefit fertilizer and petrochemical companies, as their capability to pay for gas is higher. But it will also depend upon the pipeline connectivity of Dabhol with Mumbai and Gujarat, where most fertliliser companies are located," said Arvind Mahajan, Executive Director, KPMG Advisory Services.