KOLKATA (miningweekly.com) – An Indian consortium has scrapped plans for a $770-million liquefied natural gas (LNG) terminal in the southern Indian port town of Mangalore, balking at the low capacity use of a similar existing terminal in close proximity.

The consortium, comprising oil marketer Bharat Petroleum Corporation Limited (BPCL), exploration and production major ONGC and Japan’s Mitsui, had lined up the investment to build an initial three-million-tonne-a-year LNG terminal at Mangalore, which would later have been expanded to a five-million-tonne-a-year terminal.

But the investment plan had been scrapped as a similar terminal in the port town of Kochi, just 365 km south of Mangalore, operated by Petronet LNG Limited (PLL), was reporting capacity use of under 2%.

According to an official with BPCL, the dismal uptake of a terminal just a few hundred kilometers to the south, the absence of distribution and logistics infrastructure and a general downturn in the global gas business environment, had made the Mangalore LNG terminal project unviable.

Comments from other partners in the consortium were not readily available.

Since commercialisation in 2013, the capacity use at PLL’s five-million-tonne-a-year Kochi terminal had reached a maximum of 10% and was down to less than 2% at present in the absence of a distribution pipeline to connect the terminal to hinterland user industries in the provinces of Kerala, Tamil Nadu and Karnataka. This forced PLL to cancel several import contracts for the feedstock and stop all future shipments.

GAIL India Limited, a gas distribution and logistics company with a minority equity stake in PLL, had been able to build only 40 km of the planned 900 km of pipeline to network the hinterland, with the project hitting roadblocks in the form of litigation and agitation by farmers over right of way for the proposed pipeline.

Given the experience and performance of the Kochi terminal, serious doubts have arisen over the development of another new terminal in the same economic hinterland, the BPCL official said.

The original aim of the Mangalore terminal was to receive feedstock from BPCL’s Rovuma oil and gas blocks in Mozambique. With the terminal now scrapped, BPCL was considering contracting its entire production from the block to other consuming countries in Asia.

However, an oil and gas sector analyst associated with the Indian government said the scrapping of the Mangalore terminal was in line with the global trend of similar projects either closing down or being put on the backburner against a backdrop of the crash in gas prices and the economic weakening of major consuming centres in Asia.

He said that, of the 90 odd terminal projects planned globally five years ago, only about five were currently still "alive".