Dhamra LNG Terminal Built Entirely On Promoter Finance; No Fin Commitment From IOC, GAIL: Sources

Adani Group built the Dhamra LNG import facility in Odisha entirely based on financial backing of promoters, with no financial undertaking or guarantees from public sector companies IOC and GAIL, who merely rented capacity at the new terminal.
Dhamra LNG Terminal Built Entirely On Promoter Finance; No Fin Commitment From IOC, GAIL: Sources

Adani Group built an LNG import facility at Dhamra in Odisha entirely based on financial backing of promoters, with no financial undertaking or guarantees of public sector giants IOC and GAIL, who merely were tenants, sources said.

Clarifying the group's position, they said Indian Oil Corporation (IOC) and GAIL (India) Ltd have hired capacity on the newly built terminal at rates lower than a similar but older and depreciated facility at Dahej in Gujarat.

This came in response to reported comments by Trinamool Congress MP Mahua Moitra, who is facing a Lok Sabha Ethics Committee examination over cash for query in Parliament, on Dhamra being built on financial backing and commitments to buy gas at a fixed price.

The project cost of Dhamra LNG terminal is Rs 6,450 crore, the sources said responding to Moitra's assertion that the terminal to import natural gas in its liquid form, called LNG, was built at a much higher cost than Rs 5,000 crore that IOC incurred in construction of a similar sized facility at Ennore in Tamil Nadu.

Sources said no amount upfront or during the project either as cash or bank guarantee has been given by IOC and GAIL.

The project is fully financed by equity and debt by shareholders of Dhamra LNG terminal, they said, rejecting the assertion that IOC and GAIL paid Rs 46,500 crore.

IOC had in 2015 signed to use up to 60 per cent of the terminal's 5 million tonnes a year capacity for importing gas for its refineries at Haldia in West Bengal and Paradip in Odisha. GAIL too had signed up for 1.5 million tonnes of the terminal's regasification capacity.

Sources asserted that its tariff and commercial terms of Dhamra LNG terminal (inclusive of port charges) was arrived at through competitive benchmarking.

Petronet LNG (which is owned by IOC, GAIL, BPCL and ONGC) operates India's largest LNG terminal at Dahej was used as benchmarking the tariff and commercial terms, they said. Dhamra tariff is 1.5 per cent lower (Rs 46.49 per ton or Rs 21 crore annually over 4.5 million tonnes of LNG capacity use) than Dahej LNG terminal charges and has better commercial terms as well.

Moitra had, however, compared the tariff of Dhamra with Ennore, which was commissioned not so long back.

This charge compares to Rs 57.38 per mmBtu regasification charges for Ennore LNG terminal, he had said.

Originally, IOC and GAIL had on September 21, 2016, signed a 'non-binding' agreement to buy a 50 per cent stake in Adani Group's Rs 5,500-crore Dhamra LNG project in Odisha. But that agreement expired on September 20, 2018, without being translated into a firm pact apparently because of differences over valuation.

Sources said IOC and GAIL import LNG on their own and only pay tolling charges.

Dhamra LNG will not buy and sell LNG during the operations of the facility. It only provides the service of LNG handling and dispatch, they said, rejecting the claim of a 20-year fixed payment by IOC and GAIL to Adani for gas.

On a charge that businessman Darshan Hiranandani posed questions on Adani Group using Moitra's parliamentary logins as his business was impacted because of IOC and GAIL committing to Dhamra, sources said Hiranandani's H-Energy had obtained a NOC from the Kolkata Port Trust to set up a LNG terminal in Kukrahati in February 2020. Though this NOC is still valid, they have been unsuccessful in progressing the same.

This terminal of H-Energy would cater to the same catchment area being serviced by Dhamra LNG, they said.

H-Energy was also looking at IOC and GAIL to book capacity for their terminal. However, they were unable to justify a value proposition to IOC and GAIL that was better than what was being offered at Dhamra LNG terminal. This stymied their efforts to develop this facility, sources claimed.

On IOC and GAIL not taking equity in Dhamra, they said the LNG terminal was able to offer commercially competitive terms to the users and given the pipeline tariff competitiveness of supplying nearby consumption centres, IOC and GAIL were confident of bringing LNG at the cheapest terms via Dhamra to their consumption centres.

Hence, their strategic objective was met without injecting equity and they decided to progress on a capacity booking basis only.

The strong credentials of the project developers and the significant amount of pre-investment undertaken by Adani gave further confidence to IOC and GAIL on project completion, they added.

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