Petronet LNG Ltd has chosen a group led by Japan's IHI to build a liquefied natural gas (LNG) import and regasification terminal at Dahej in the western state of Gujarat, Indian oil minister Ram Naik said yesterday.

The project, estimated to cost Rs25 billion ($536 million), is expected to be completed by December 2003, he told reporters. "All concerned should now ensure that there is no time- overrun in the implementation of the project," Naik said.

The receiving, storage and regasification terminal will be capable of handling five million tonnes of LNG per annum. IHI, or Ishikawajima-Harima Heavy Industries Co Ltd, was bidding for the engineering, procurement and construction (EPC) contract in partnership with Toyo Engineering India Ltd, Itochu Corp, Mitsui Co Ltd and Netherland's Ballast Nedam International BV.

Petronet is also planning another LNG import terminal in the southern state of Kerala which is expected to be completed by July 2004, the minister said. Petronet LNG is a joint venture company promoted by Bharat Petroleum Corp Ltd, Gas Authority of India Ltd, Indian Oil Corp and Oil and Natural Gas Corp Ltd. These companies together hold a 50 per cent stake in the company.

Naik said the government has decided to give 10 per cent each to Qatar's Rasgas and French gas major Gaz de France. Rasgas or Ras Laffan Liquefied Natural Gas Co has also signed a sale-and-purchase agreement with Petronet to deliver five million tonnes a year for Dahej as well as 2.5 million tonnes a year to Kerala.

The French firm is Petronet's consultant for the selection of a contractor and shipper, and plans to extend its expertise for supervision of construction of the terminals. The government of western Gujarat state, where the terminal will be built, will hold five percent and remaining 25 per cent equity will be with the banks and financial institutions, he said.

The minister also said state-owned GAIL has entered into pacts with the governments of western Maharashtra and southern Karnataka states to study the demand for gas. "We need to have a scientific study that gives us the exact demand for gas in India," Naik said.

He said GAIL would soon tie up with other states also for similar studies. India's natural gas supply is currently 64 million standard cubic metres per day (MSCMD) and its output is expected to plateau at 85 MSCMD. It is estimated that the demand-supply gap would increase from 47 MSCMD in 2002 to 355 MSCMD in 2025.