Reliance Industries and oil major BP's plan to take a stake in a new gas import terminal of Petronet LNG have been grounded under pressure from the oil ministry, which has had a strained relationship with RIL since last year, sources close to the development said.
Reliance and BP, which are partners in oil and gas blocks in India and have set up a joint venture for gas marketing and infrastructure, had been negotiating with Petronet for a stake in the upcoming LNG terminal in the Gangavaram port in Andhra Pradesh, and would have used BP's international presence, sources said.
"Yes,over the last three to four months, RIL and Petronet LNG were actively discussing a strategic partnership which did entail a sizeable equity investment in Petronet's upcoming terminal in the Gangavaram port. Another key aspect of the partnership was Petronet LNG capitalising on BP's ability to source LNG globally, but now these talks are in limbo as the ministry is not keen on this partnership," said an industry source.
The oil ministry has taken a stern approach towards Reliance after the sharp fall in natural gas output from the KG-D 6 field, which was once feted as the game-changing discovery that would double India's gas production. The oil ministry says output fell because the company did not drill enough wells while Reliance blames geological uncertainty and says that drilling additional wells is akin to inserting more straws to the same can of coke. Industry officials say the tense relationship between the ministry and the company was a hurdle in plans to partner Petronet.
"The ball is now in Petronet LNG's court," an industry source said. "RIL has been keen to strike a longterm LNG sourcing and marketing partnership with Petronet LNG and was keen on picking up a stake in its new terminal in Gangavaram port, but now these discussions have slowed down as the petroleum ministry has asked Petronet LNG to reconsider the partnership," said a source close to RIL.
Partnership with Petronet would have helped RIL's ambitious plans for India Gas Solutions, the venture RIL and BP set up after the British firm bought stakes in RIL oil and gas blocks including KG-D 6 for $7.2 billion last year. Sourcing and distributing LNG is a key aspect of this partnership especially as domestic gas production has fallen sharply because of the decline in KG-D 6 output. India's natural gas output is estimated at 104 mmsmd in the current financial year while current demand is about 166 mmscmd, Petroleum Minister Jaipal Reddy told Parliament in May.
For Petronet LNG,the Gangavaram terminal will be its first on the east coast.In the first phase, it will have a capacity of 5 million metric tonne per annum (mmtpa) and will need an investment of.4,500 crore. It is slated to be operational by 2016. This will be Petronet's third LNG terminal. It currently operates one in Dahej in Gujarat which has a capacity of 10 mmtpa, and is also in the last stages of completing another one at Kochi, Kerala, which will have a capacity of 5 mmtpa.
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