However, the state government has also laid down three pre-conditions for equity investment in the project. To begin with, the government has directed GPLCL to specify the exact quantum of investment it proposes to put into the project. In addition, the Gujarat government has also directed the joint venture company to finalise a gas supply contract with the foreign gas supplier which would be providing gas for the project.

The state government has also laid down the pre-condition that there should be a government nominee on the board of GPLCL. According to highly placed sources in the Gujarat government, Chief Minister Keshu Bhai Patel took the decision to invest in the project after he was advised to do so by senior state governmentofficials on the grounds that the move would be in accordance with the guidelines laid down by the Gujarat Infrastructure Development Board.

Not only that, the state government's decision to pick up five per cent equity in the Gujarat Pipavav LNG project is also along the same lines as its earlier decision to have equity in the Petronet LNG Company which would be developing port jetties at Dahej in Gujarat including LNG and solid cargo handling facilities.

With the Gujarat government now deciding to pick up equity in GPLCL, the equity structure of the company would be as follows: British Gas 25 per cent, Sea King Infrastructure Limited 25 per cent, NTPC 26 per cent, Kribhco 15 per cent, Gujarat government and its public-sector undertakings 5 to 9 per cent.

Incidentally, the estimated cost of the Pipavav project including construction of the underwater pipeline from Pipavav to Hazira is around $565 million. The likely customers for LNG from the Pipavav project include NTPC, Kribhco, IFFCO, IPCL, GNFC,Gujarat Gas, BSES, Gujarat Torrent Energy Corporation, Essar and Singapore Power.

However, since most of the demand from the Pipavav LNG project which is to be located in the Saurashtra region would be from facilities located in middle and southern Gujarat, it is feared that this would make the LNG fairly expensive for the prospective customers compared to the LNG procured from the Petronet LNG Company's Dahej facility which is to be located in close proximity from the main areas of demand. Though fixation of gas pricing and duration of gas supply contract are of vital importance for such a project, nothing has been finalised in the case of the Gujarat Pipavav LNG project thus far. However, according to corporate sources involved in the project, negotiations in this regard are in an advanced stage and are likely to be finalised shortly.

For the gas supply contract, talks are being held with the Yemen LNG Company, an undertaking of the Yemen government. However, some sections of the industry are demandingthat there should be open bidding for selection of the gas supplier. The government, on the other hand, is reluctant to opt for the open bidding route as it is felt that this will delay the commencement of the project indefinitely.