Petronet LNG to take 26 per cent stake in BPCL’s Krishnapatnam LNG terminal

Petronet LNG Ltd (PLL) , India’s biggest importer of liquefied natural gas(LNG), will take a 26 per cent stake in a planned 1 million tonne (mt) capacity terminal for import and re-gasification of the super cooled fuel. This terminal will be helmed by Bharat Petroleum Corporation Ltd (BPCL) at Krishnapatnam port in Andhra Pradesh’s Nellore district.

BPCL has received the board’s approval for the project, which is estimated to cost some Rs 1,700 crore and is targeted for operations by 2024.

“We have an arrangement for PLL to take a 26 per cent stake in the project,” a top BPCL executive told BusinessLine. “We are also talking to Japanese firms such as Mitsui & Co and NKK as well as some other firms to take stakes in the terminal,” the executive said, asking not to be named.

PLL, part-owned by Oil and Natural Gas Corporation Ltd, GAIL (India) Ltd, Indian Oil Corporation Ltd and BPCL, runs LNG regasification terminals at Dahej in Gujarat and Kochi in Kerala.

BPCL’s decision to build the terminal at Krishnapatnam port was dictated by the need for such facilities on the Eastern coast to tap demand for the clean fuel in the Southern and Eastern parts of the country.

Most of the LNG regasification terminals are currently located on the country’s Western coast.

D Rajkumar, Chairman and Managing Director of BPCL said that the project was “first of its kind in India”.

“The uniqueness of this project is that we are not looking at 3 mt or 5 mt or 7.5 mt in the initial stage itself. But, depending on the demand, we will be scaling up the project. We are starting with 1 mt and go to 3 mt and then to 5 mt depending on the demand so that we don’t land-up in a situation where the utilization of the terminal is very low like unfortunately what is happening with the Kochi LNG terminal,” Rajkumar said.

“We are not looking at a floating storage re-gasification unit (FSRU) or land-based terminal, we are looking at a floating storage unit (FSU) and then regasification on land; this is being used in other parts of the world, so we thought of doing this mainly to reduce project cost in the initial stages,” he added.

“BPCL is trying to be cautious on the capacity and the investment it will make in the project. Instead of making a Rs 6,000 crore investment upfront, we are starting small,” the BPCL executive mentioned earlier said.

The oil refiner is also scouting for a captive customer for the terminal. “Besides, we are thinking that our terminal can also look at feeding some other markets that will come up such as the city gas distribution (CGD) in that region, Hyderabad and around and Eastern India,” he added.

CGD will happen in the Eastern region, but they will not have any gas feed, as all re-gasification terminals are on the West. “In the West, pipelines will come, but the East market is going to suffer. The success of CGD in the East will depend on the ability to have products being made available there. Plus, we are also anticipating that Mozambique will start giving gas and we will have our own gas,” the BPCL executive said.

Bharat Gas Resources Ltd (BGRL), the gas unit of BPCL, has signed a Sales and Purchase Agreement, to source 1 mt of LNG a year for 15 years from the Mozambique LNG project, and the supplies are expected to start from 2024-25.

BGRL is looking to double its gas business to 5 mt by 2022 from 1.8 mt, Rajkumar said. It has acquired 13 geographical areas (GA) in the Ninth and Tenth rounds of bidding for CGD networks. The firm is targeting a portfolio of 37 GA’s, he added.