Indian Oil, GAIL To Pay Adani 5% More Than Their Own LNG Terminal, Says Dharmendra Pradhan

State-owned Indian Oil Corporation Ltd. and GAIL (India) Ltd. will pay Adani Group 5 percent more in hiring charges for using the private firm's upcoming liquefied natural gas import facility at Dhamra in Odisha than their own similar terminal, Oil Minister Dharmendra Pradhan said on Monday.

India's largest oil firm IOC, which recently commissioned a 5 million tonne LNG import terminal at Ennore in Tamil Nadu, as well as gas utility GAIL have "both technical and financial capability to develop their own LNG terminal," he told the Lok Sabha.

The two firms have, however, hired capacity in Adani's under-construction LNG import terminal at Dhamra.

IOC had in 2015 signed to use up to 60 percent of the terminal's capacity for importing gas for its refineries at Haldia in West Bengal and Paradip in Odisha. GAIL too had signed up for 1.5 million tonne of the terminal's regasification capacity.

"GAIL and IOC have agreed to pay the tolling charge of Rs 60.18 per million British thermal unit for the regasification facility at Dhamra LNG terminal with annual escalations in line with their respective contractual provisions," he said in a written reply to a question.

This charge compares to Rs 57.38 per metric million British thermal unit regasification charges for Ennore LNG terminal, he said.

GAIL's own Dhabhol LNG terminal in Maharashtra levies Rs 49.28 per metric million British thermal unit regasification charge. In addition, there are other charges such as terminal charges, vessel-related charges and port charges for utilization of the Dabhol LNG terminal.

"The regasification charges for Ennore and Dhamra terminals are inclusive of terminal charges, vessel-related charges, port charges, and any other port-related charges," Pradhan said.

Originally, IOC and GAIL had on Sept. 21, 2016, signed a 'non-binding' agreement to buy 50 percent stake in Adani Group's Rs 5,500-crore Dhamra LNG project in Odisha. But that agreement expired on Sept. 20, 2018, without being translated into a firm pact apparently because of differences over valuation.

"It has been informed that the regasification charge for Dhamra terminal is Rs 60.18 per mmBtu for the first contract year (year of commissioning) which is likely to be in fiscal year 2021-22," Pradhan said.

"GAIL has executed a Tolling Agreement in line with its procedures to meet the supply commitments of customers located in the eastern parts of the country along JagdishpurHaldia/Bokaro-Dhamra Pipeline project. IOC has also booked capacity at Dhamra Terminal after considering its captive requirement of Paradip, Haldia and Barauni refineries."

He said the booking of regas capacity is being done after "protracted techno-commercial discussions with the promoters of Dhamra LNG Terminal and after considering the location of the terminal, availability of gas evacuation pipelines, affordability of regasification charges and capturable demand in the catchment area."

The Sept. 21, 2016 "non-binding MoU" followed GAIL dropping plans in March 2015 to set up a floating LNG import terminal at Paradip. IOC too had in 2012 signed a memorandum of understanding with Dhamra LNG Port Corp Ltd. to develop an LNG terminal at the port.

Also, Petronet LNG - a firm in which GAIL and IOC are promoters, had shelved plans to set up a 5 million tonne a year LNG import facility at Gangavaram in Andhra Pradesh.

After shelving their respective plans, IOC and GAIL signed a pact with Dhamra LNG Terminal, a firm owned by Adani Group.

"GAIL and IOC have both technical and financial capability to develop their own LNG terminal," Pradhan said. "GAIL has an equity stake in Konkan LNG Pvt Ltd and is the owner's engineer as well as the operator of this terminal at Dabhol. IOC has recently commissioned a 5 million tonne LNG terminal through a joint venture at Ennore in March 2019."

The two firms also have an equity stake in Petronet LNG which operates two LNG regas terminals, one at Dahej in Gujarat and the other at Kochi in Kerala, he added.