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Decks cleared for Shell's Hazira port project -- Rs 3,000-crore FDI to flow into Gujarat

Vinod Mathew

GANDHINAGAR, April 19

THE Gujarat Government is gearing up to give the official nod to the Hazira port to be put up by Shell Gas BV, a member of the Royal Dutch Shell group, sometime next week.

Effectively, this will mean a fresh flow of foreign direct investment (FDI) to the tune of Rs 3,000 crore into the State over the next two years. For a State, which had taken a beating on its investment climate image due to the recent riots, this would come as a major boon.

The concession agreement that is scheduled to be signed by Shell and the Gujarat Maritime Board (GMB) will give the official seal of approval to a project that got under way almost five years ago. While August 1997 saw the invitation for bids for the Hazira port project, another critical phase came in November 1999 with the signing of the letter of intent (LI).

Talking to Business Line, Mr Sunil Sud, Chief Executive Officer of the Gujarat Infrastructure Development Board (GIDB), said the concession agreement with Shell was cleared by the board on April 15. The first phase of the 11.5 million tpa port - the 5 million tpa LNG terminal - would come up in 20 months, though formally the time for commissioning the project has been kept at 30 months. The company is confident of achieving financial closure over the next 12 months.

``The concession agreement would allow Shell to operate the port on a BOOT basis either for a period of 35 years from the date of signing the document or for a 30-year period after the port gets going. All assets created by Shell would revert to the Gujarat Government at a depreciated replacement cost which could be anywhere between Rs 1,800 crore and Rs 2,000 crore at the end of the concession period. As Shell has requisitioned only one year for a concessional rate on water front royalty, the second operational year will see Gujarat richer by some Rs 35 crore on royalties'', Mr Sud said.

The first phase of the port project would see an investment of $ 200 million by Shell towards infrastructure for the LNG terminal, including approach channel, basin and breakwater. All these components are not stand alone for the LNG terminal and would serve the company in the second phase, which comprise the solid cargo port. The investment in the regassification plant by Shell, though not strictly a part of the Hazira port, is expected to be $ 400 million. The mark-up for LNG tankers would be another $ 500 million.

The work on the second phase of the project, which would commence in 2005, is expected to give a go-by to the originally conceived solid cargo segment that included coal and POL, considering that many ports in Gujarat are already offering these facilities. It is expected that Shell would concentrate largely on a container terminal, at the same time enhance the LNG terminal capacity, keeping in mind the aggregate 11.5 million tpa capacity at Hazira.

Meanwhile, it would be a toss-up between some seven LNG export projects that Shell currently has on hand for bringing LNG to Hazira.

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