The petroleum ministry will soon come out with a policy on setting up LNG infrastructure in the country to expedite the development of the domestic gas market, hobbled by the wide gap between demand and indigenous production of the green fuel.
While the petroleum and natural gas regulatory board (PNGRB) has the power to authorise development of LNG terminals, there is no policy that could provide clarity to investors looking at putting their money in the sector.
Sources said the proposed policy might set out conditions on key aspects like minimum investment requirement, capacity for common-carrier players and eligibility to set up terminals. Common-carrier players are third parties who might need to use the services of the terminal.
The policy is likely to dictate reserving 20% of the terminal capacity for third parties under the common-carrier principle. The minimum project size could be put at 2.5 million tonne a year. It may also bar overseas LNG suppliers from setting up terminals. However, such investors will have the option to undertake re-gasification business in India through a subsidiary company.
The constant decline in domestic gas output has forced Indian oil firms to shift focus on importing gas from foreign markets. At present, the gap between the demand and supply of natural gas is being partly met by importing liquified natural gas (LNG).
As the output from Reliance Industries? most prolific KG-D6 gas fields continues to slide, several oil companies are in process of constructing LNG terminals in India and importing gas, even at higher rates to meet the burgeoning demand.
The few companies among the list who are planning to set up LNG terminals are Indian Oil, which proposes to set up a 5 million tonne terminal at Ennore Port by 2015, Reliance Power is in a joint venture with Shell and is likely to come up with a terminal in Andhra Pradesh, which is located in proximity to KG-D6 block and it?s gas-based Samalkota power plant with a capacity of 5 million tonne by 2014. Oil India also has plans to enter the LNG business by the end of this fiscal.
?There is a desire by many companies to set up LNG terminals but there is no concrete plan in place and it will certainly take time. With the government coming out with a policy will help the business to grow in a more transparent manner,? said RK Garg, director (finance), Petronet LNG.
The current domestic production of gas stands at 135 mmscmd and the current demand of gas is around 243 mmscmd. According to industry estimates, even if the domestic production from Reliance KG-D6 output goes up, the demand of natural gas will be around 530 mmscmd by 2019-20, and the output will be to the tune of 215 mmscmd.