RIL, in consortium with Elf Acquitaine Gaz and Tractebel, is one of three bidders shortlisted by the Gujarat Maritime Board for a mega port project based in south Gujarat.

While details are still being worked out, Reliance will be the lead developer while Elf Acquitaine Gas is keen to pick up an equity stake in the LNG terminal. Tractebel has been roped in for technical support, especially in the design and engineering of the terminal. Tractebel has not made any commitment to equity or debt.

By tying in the LNG-based port project with the 2,000mw power plant, RIL hopes to kill two birds with one stone. It will not only plug the power gap in south Gujarat, but in the process make the port project more viable by dedicated offtake of cargo.

There is an estimated demand of 4,150mw in south Gujarat alone,but the planned future capacity so far is only approximately 2,000mw. Essar has a 515mw plant which will be doubled in future and NTPC has 440mw, also to be doubled later on. Reliance has a 240mw captive plant. Reliance's project will also effectively cut off competition from other LNG providers, at least in south Gujarat.

Given the situation, RIL has proposed to set up a 2.5 million tpa LNG terminal, which can cater to 2,000mw in phase I. In line with these plans, the Gujarat government would have to tender the power project first. In the second stage the capacity of the LNG terminal is proposed to be doubled, but only once the company has back-to-back arrangements with other power producers. While a market for LNG exists even in south Gujarat, RIL is also looking at the possibility of supplying the fuel to power-starved Madhya Pradesh and Rajasthan.

RIL has for sometime now been keen to enter the LNG providers market in a big way as the global perspective for the fuel seems bright. With prices reachingan all-time low of US $2.4 per MMBTU, it is emerging as a cost-effective alternative to coal which involves transportation. Also, a huge oversupply will ensure that prices remain depressed in the long term. For instance, in Asia Pacific alone the supply is approximately 125 million tpa, compared with a demand of 98 million tonnes.

With this structure, analysts expect RIL to have easier access to funds. For purely port-based projects, with or without LNG terminals, traffic projections have been one of the chief concerns of lenders. This risk will be covered by the dedicated offtake. With the LNG terminal bundled with the power plant, the guaranteed return on the power plant will absorb some of the risk of the port project.

Besides, new ports would find it impossible to compete with existing ports on tariff. Assured returns on fuel cargo will enable the private port to offer more competitive rates on general and container cargo - another plus in tying up funds.

According to the master plan submitted byRIL, two solid and one general cargo berth will be constructed in the second stage of the project. The former will have a capacity of 6 million tpa and the latter 3 million tpa. In phase II, the company hopes to create an industrial estate, integrated industrial park and export processing zone. Company sources however say they would have to wait for volumes to materialise before this can be done. The container terminal is scheduled for this phase as well.

There are however some conerns about the large number of LNG projects coming up in the state. There are four projects planned besides the Hazira plan. Petronet LNG is setting up a facility at Dahej and British Gas at Gujarat Pipavav port. The government has already given a letter of intent to Natelco, a telecom company run by an NRI for an LNG-based port project at Maroli. In addition to these Reliance has an FIPB clearance for an LNG terminal at Jamnagar. At least three of these are in the Gulf of Khambatt itself.

Mobil-led consortium pegs cost at Rs4,144 cr

Mobil LNG and Power Inc and Ras Laffan LNG Co, another consortium bidding for the Hazira port, has projected a cost of approximately Rs 4,414 crore. While their proposal is not tied up with a power plant, they have proposed the construction of the LNG terminal in the first phase, expansion of the LNG terminal and petrochemical berth in the second phase and dry bulk and general cargo berths in the third. While the LNG terminal is estimated to cost $364 million, the dry cargo bulk will cost $435 million.