BG Plans To Invest $1 Bn In India

New Delhi, March 6: | Updated: Mar 7 2003, 05:30am hrs
The BG group on Thursday announced its plans to invest $1 billion in India over the next three to five years but said investment to a large extent will depend on the development of the gas market in the country.

The group offering to sell 2.5 million tonne of liquefied natural gas (LNG) from Iran to western and northern India at competitive price also sought fiscal concessions for LNG.

Fiscal incentives include infrastructure status for LNG projects, zero import duty and a uniform sales tax rate of 4 per cent on LNG to meet the domestic industry expectation of a delivered cost of $3 per million British thermal unit (btum).

Addressing mediapersons, group chief executive Frank Chapman said, We are the lowest cost operator of LNG in the world. Our upcoming greenfield LNG liquefication plant in Iran can supply gas to energy deficit India at the lowest cost.

He said the government should put in place a fallow acreage and an integrated LNG policy.

Fiscal regime needs to support development of the energy sector. Given the right regulatory and fiscal regime, we can meet customer aspirations, said Mr Chapman, who is visiting India with the entire board of BG group.

He said its 2.5 mt LNG import and regasification terminal at Pipavav in Gujarat was not on hold. We need long-term credit worthy anchor load for the project to go ahead. Though BG had committed initial LNG from the gasfield in northern Iran for supplying to Europe, the company was looking at supplying at least 2.5 million tonne per annum of LNG to India in the near future.

On the high cost of LNG compared to domestic gas, he said, Fiscal red-tape accounts for a dollar per btum in the delivered price, and if that was removed by way of incentives, we could also meet the aspirations of customers like NTPC, which has been seeking a fixed price of $3-3.5.

Mr Chapman said BG and GAIL India Ltd were in discussions to form a strategic alliance for bringing the Iran LNG.

GAIL may participate in BGs natural gas liquefication plant in Iran and may also help it to sell LNG in western and northern India. Iran LNG offers the lowest cost potential for India, he said while making a case for placing imported gas on par with the subsidised domestic natural gas.

The Budget for 2003-04 had only half-heartedly reduced customs duty on capital goods for LNG plants to 5 per cent from 25 per cent and larger demands like zero duty on LNG (from current 5 per cent) and infrastructure status for LNG projects did not find mention in the Budget.

The duty relief provided in the Budget would only reduce the delivered LNG cost by just 10 cents per million btum, while customs duty cut and infrastructure status are required to bring it down to around $3 per million btum.

BG also sought declared good status for LNG so as to attract only 4 per cent sales tax against 22 per cent.