GAIL Commissions Dabhol LNG terminal - Power and Fertilizer Sector To Benefit

The gas strapped country that India is, has received a breather after Gas Authority of India (GAIL) has commissioned its Dabhol LNG Terminal located at Ratnagiri, Maharashtra. Currently this terminal has a capacity of 5 million tonne per annum (MTPA). GAIL is further investing Rs 1000 crore to expand this capacity to 7.5 MTPA in the next two years and another Rs 2000 crore to increase it to 10 MTPA by 2016-17. GAIL is also in an advanced stage to commission the 1400 KM Dabhol-Bengaluru pipeline system which will transmit gas to the southern states.

GAIL has LNG linkages with Qatar-based gas supplier RasGas. It has also ties with companies in the US, Africa, Europe and Russia from which supplies will kick off from 2017. After commissioning of the terminal, the first cargo is expected to arrive by end of the January from Russian energy major Gazprom.

Currently there are two LNG terminals at Dahej and Hazira in India, which are operating at a maximum capacity. In view of the current acute shortage of gas in the country we expect the Dabhol LNG Terminal to somewhat meet the gas demand in the country.

Over the last two and a half years, Reliance Industries has been facing a decline in gas production from its gas fields in the KG-D6 basin. Due to this decline, power generation plants as well as fertilizer plants have been facing a severe fuel crunch which has impacted the profitability of the companies in these sectors. Gas-based power plants particularly in the southern region have faced the worst phase as their plants are operating at historically low utilization rates as per data published by the Central Electricity Authority.

With the commissioning of this terminal, gas issues in the states of Maharashtra, Goa, Tamil Nadu and Karnataka will be partly addressed. Power and fertilizer plants based on gas from these states will get a gas supply from the Dabhol LNG terminal. Even though 100% gas supply cannot be assured for the plants in these states, it can be met partially for at least the next two years. Further, with increase in capacity there would be a rise in the gas supply over the next four years. This is another step forward for the troubled power sector as well as the fertilizer sector both of which are deprived of a fuel supply. We expect power companies like NTPC, Tata Power, GMR Infra, GVK Power, and Lanco Infratech to show benefits from this development. Fertilizer companies like Zuari Agro Chemicals, Rashtriya Chemicals and Fertilizers (RCF) etc will also benefit from this.