According to sources in the Gujarat government, the recommendation has been taken seriously and talks are on to finalise a joint venture partner. Among interested parties are the GPPL-British Gas combine for the first phase of the project. Gujarat Gas, a subsidiary of British Gas, is currently implementing the Rs 125-crore Surat-Ankleshwar pipeline. Its existing pipeline network has a carrying capacity of 7.8 lmcd. While GPPL chairman Nikhil Gandhi has confirmed that Seaking, one of the promoters of GPPL, is interested, he feels that the government will have to resolve several issues before privateinvestors step in.

Sources say Unocal has also been approached since the Natelco-Unocal combine will be setting up a 2.5-million-tonne LNG handling terminal at Maroli in south Gujarat. Experts however feel that since the LNG terminal will be constructed in phase-II of the project, where work is unlikely to start before 2005, the GPPL-Gujarat Gas combine may have a better chance.

One of the biggest roadblocks to the project is the issue of whether gas is a central or concurrent subject. While legal opinion is being sought on whether a state needs to seek permission from the Centre for the gas grid, regulation is seen as being a state subject.

CAS has recommended that the state government immediately clarify all these issues. Since private investors will be entering the sector, the state government will also need to set up a regulatory authority. The functions of the authority such as awarding licences, pricing, market structure and policy for competition will have to be sharply outlined.

While apreliminary survey has already been completed, CAS has asked for a detailed feasibility study that would establish the accurate demand for LNG in the state. Although consumption by industry has been growing at 19 per cent, it still accounts for only 7 per cent of the total energy consumption. Of this, 46 per cent is consumed as feedstock for the fertiliser industry and 36 per cent is accounted for by the power industry. While 2.4 billion cubic meters of gas was supplied by Gail in 1997-98, the registered demand with the company is 96.02 billion cubic meteres in 2000-2001, indicating a huge demand-supply gap.

With Gujarat expected to get the west India-based 2,000mw gas-fired plant, its share of the consumption is expected to jump. Several other gas-based IPPs are also on the anvil. Based on the completion schedules of these power plants, four LNG handling terminals have been planned at Pipavav, Dahej, Maroli and Hazira.