India's HPCL buys out Shapoorji Pallonji's 50% stake in Gujarat LNG terminal

New Delhi — India's downstream fuel retailer Hindustan Petroleum Corp. Ltd., or HPCL, has acquired a 50% stake in a greenfield LNG terminal project in the western state of Gujarat, from Mumbai-based Shapoorji Pallonji, it said in a statement late-March 30.

The acquisition allows state-run HPCL, which is also India's third largest refiner, to diversify its product portfolio and move towards the national target of raising the percentage of natural gas in the energy mix to 15% from 6% by 2030

The 50% equity stake in joint venture HPCL Shapoorji Energy Private Ltd., or HSEPL, was acquired from SP Ports Private Ltd., a subsidiary of construction conglomerate Shapoorji Pallonji Group, on March 30 after which HSEPL will become a fully-owned subsidiary of HPCL, the statement read.

HSEPL is constructing a 5 million mt/year LNG regasification terminal in the city of Chhara in Gujarat state at a project cost of about Rupee 4,300 crore ($585 million), which is likely to be completed by the end of calendar year 2022, HPCL said.

"The terminal will have all facilities for receipt of LNG through ocean going tankers, marine unloading, storage, LNG road tanker loading, regasification, and supply of regasified LNG to the gas grid. The project is further expandable to a capacity of 10 MMTPA in future," HPCL said.

In a March 28 regulatory filing, HPCL said the all-cash deal was signed on a mutually agreed valuation, but did not disclose the size of the deal. It said no governmental or regulatory approval was needed and the acquisition process is expected to complete by March 31, the last day of the current fiscal year (2020-21).

The associated port in Chhara in Gujarat state will be developed by Simar Port Private Ltd., a 100% subsidiary of SP Ports. The SP Group had deferred the completion of the new port by three years to December 2023 due to financial stress, the filing said.

The LNG terminal has been planned to run on a tolling model with off-takers having the choice to book capacity on a 'take or pay' basis, source and re-gasify LNG, pay regasification charges, and sell the regasified LNG to end consumers via a high-pressure gas grid.

HPCL operates in 34 districts across 9 states in India, has 674 CNG stations and is foraying into setting up of LNG dispensing stations.