Essar, Adani and JSW to build LNG terminals at ports

MUMBAI: Conglomerates in India now have a Rs 17,000-crore investment theme built around an industrial fuel: liquefied natural gas (LNG).

The Essar, Adani and JSW Groups, among others, are setting up LNG terminals along India’s eastern and western water margins as natural extensions to the port infrastructure, reflecting the increasing demand for the gas as an alternative energy source in the country as global prices of the fuel head south.

Essar Ports, part of the Essar Group, has won the recent bid for a Rs 450 crore, 1-million-tonne LNG import terminal at the Haldia port in West Bengal, according to two people aware of the developments. The Kolkata Port Trust had called bids for the terminal, for which staterun Petronet LNG and V Energy were also in the race.

"As a group, we keep looking at growth opportunities in its businesses. But it is not our policy to comment on any specific proposal," a spokesperson for the Essar Group told ET.

Essar, Adani, and JSW Groups' planned investments on their respective LNG terminal projects total Rs 17,000 crore: At its Dhamra port in Odisha, Adani Ports and SEZ is building an LNG terminal of 5 million ton capacity, entailing an investment of Rs 5,200 crore, and an LPG terminal of 2.5 million ton capacity, which would see an additional investment of Rs 2,300 crore. The JSW group has also tied up with the Hiranandandani Group, spending up to Rs 4,000 crore to set up an LNG terminal at JSW's Jaigarh port in Maharashtra.

Essar might sign the 30-year licence agreement in the next couple of months. It has already sought environmental clearance for the project that may come up in the next two years. The majority of the equipment would be on lease, keeping the investments relatively low, one of the two sources quoted above said. Later, Essar might set up a 5-million-ton LNG terminal at its facility at Hazira in Gujarat. "Going forward, LNG will be the focus for Essar," the person said.

A consortium led by Russia's oil giant Rosneft has bought the group's oil business for $12.9 billion putting the ports out of almost all liquid cargo. The resultant shift is toward hydrocarbons. "On a group level, Essar could be a large user of LNG, through its steel plants," said the source.

A fall in LNG prices amid rising demand stoked new investments in the fuel’s storage and transportation infrastructure. "There is high demand for LNG, and shift towards alternative sources of energy," said Kalpana Jain, partner at Deloitte India. "Of course, the prices are a reason too. Landed rates in Japan, for instance, have fallen to $5 per unit from $16 in the last two years."

The Adani Group's two terminals in Odisha would help close the gap in the state's energy requirements, and support various local ancillary industries. At Mundra in Gujarat, the Adani Group is currently working on an LNG terminal that will have an initial annual capacity of 5 million tons a year. It is also working on a 1.6 million ton LPG import terminal. The project cost of the LNG import terminal is estimated to be about Rs 4,500 crore.