NEW DELHI: Liquified natural gas (LNG) handling terminals in the country, including the proposed ones, will have to offer a little less than a third of their total capacity for third-party use at fair and competitive terms, according to the norms being worked out by the oil ministry.
The idea is to remove entry barriers in the business of supplying imported natural gas to industries. Open access is considered vital for fostering competition in the LNG sector as it optimises land use by various players for regasifying the frozen gas and its further transportation to customers. It would allow new players to enter into LNG trade without actually investing in infrastructure. They only need to partner with terminals and pipeline operators like GAIL India.
Open access of LNG terminals would become mandatory once the oil ministry finalises the norms for registering these facilities with the sector regulator, the Petroleum and Natural Gas Regulatory Board (PNGRB). The government has asked the industry to give its views on the subject. Once the norms are notified, existing LNG terminals such as Petronet LNG’s Dahej facility and Shell-Total consortium’s Hazira terminal will have six months to get registered with the regulator, while the new ones will need prior registration to operate.
PNGRB has mandated open access of a third of the total capacity for oil and gas pipeline operators. “However, a third may be a bit too high for an LNG terminal that requires huge investments. The capacity to be reserved for open access will be finalised soon,” said a source, who is privy to the discussions.
The government will also decide whether to fix the compensation for third-party access or whether it should be left to negotiations between the parties, said the person.
GAIL, along with the Andhra Pradesh government, is now setting up the country’s first 4-million-tonne floating LNG terminal off the Andhra coast with an investment of around R2,000 crore. Petronet LNG, promoted by state-owned companies including GAIL, is also boosting the capacity of its 10-million-tonne a year Dahej terminal to 15 mmtpa in addition to setting up a new 5 million tonne a year terminal in Kochi. Reliance-BP joint venture, India Gas Solutions, is also planning to enter the business. With this planned capacity expansion, the market for imported gas in Asia’s third largest economy is set to jump four fold in value to nearly $15 billion in a couple of years.