IndianOil and GAIL sign MoU for equity in Dhamra LNG terminal

IndianOil Corp. and GAIL (India) Ltd. have signed an MoU with Dhamra LNG Terminal Private Ltd. (DLTPL) to take a 50% equity stake in the 5-MMtpy-capacity LNG receiving, storage and regasification terminal under construction at Dhamra Port, Odisha.

As per the MoU, DLTPL shall be an equal JV of IndianOil and GAIL on one hand and Adani Group on the other. Indian Oil and GAIL would acquire 39% and 11% equity respectively in DLTPL with the balance 50% being held by Adani group. Going forward, IndianOil and Adani group will each divest 1% of their respective stake to a credible financial institution which will then have 2% stake in the terminal. Apart from equity, IndianOil and GAIL intend to book regasification capacity of 3 MMtpy and 1.5 MMtpy respectively in the terminal.

The development comes in the backdrop of the government’s consistent focus on undertaking welfare and growth measures in eastern India, so as to bring this hitherto underdeveloped region into the economic mainstream of the country. Prime Minister Narendra Modi has maintained that India cannot develop till the eastern part of India develops.

Presently, the states in eastern India viz. Odisha, Bihar, Jharkhand and West Bengal are not able to get the benefits of natural gas in for use in the industrial, transportation or domestic sectors, as the region does not have gas infrastructure by way of LNG Terminals or a cross-country gas pipeline grid. The LNG Terminal at Dhamra would provide the potential customers in these states a clean and economically viable alternative which will also help in reduce their carbon footprint. This will also provide momentum for the economic growth of this region by attracting new industrial projects.

The LNG terminal would also meet the gas requirements of three Indian Oil refineries situated in Barauni, Haldia and Paradip. The three fertilizers plants at Barauni, Sindri and Gorakhpur which are being revived by the government will also benefit from this terminal. The natural gas from the terminal would also supply various city gas distribution networks coming up in eastern India, which in turn would cater to the requirements of piped gas for households, CNG for automobiles and clean fuel requirements of commercial establishments and industries. It is expected that, once operational, Dhamra LNG terminal will emerge as a bridge to prosperity for all of eastern India.

In a related development, Cabinet Committee on Economic Affairs approved a capital grant of approximately $770 MM for the Jagdishpur-Haldia and Bokaro-Dhamra Pipeline (JHBDPL) project, which is being implemented by GAIL (India) Ltd. The total project cost is estimated at $1.9 B. This is the first time ever that the government of India has extended a capital grant to a natural gas pipeline project.

The 2,539 km long JHBDPL is expected to be completed by December 2020 and will connect UP, Bihar, Jharkhand, West Bengal and Odisha. The project will also see City Gas Distribution (CGD) networks being set up by GAIL in 7 important towns in eastern India, namely, Varanasi, Patna, Ranchi, Jamshedpur, Kolkata, Bhubaneshwar and Cuttack. The JHBDPL gas pipeline will be used for gas supply to 3 fertilizer plants in eastern India, namely Barauni, Sindri and Gorakhpur.

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