By SAURABH CHATURVEDI

NEW DELHI -- Royal Dutch Shell, Reliance Power and Kakinada Seaports will jointly build a terminal on India's east coast to import liquefied natural gas, seeking to tap into the rising demand for the fuel in the energy-starved nation.

Many local and overseas companies are planning to set up or expand LNG terminal capacity in India as domestic gas supply is estimated to remain short of the expanding demand from industries such as power, refineries and petrochemicals.

India has an LNG import capacity of about 13.5 million tons, which is estimated to reach 50 million tons by 2017.

About 9% of India's 201 gigawatt electricity generation capacity is gas-dependent, and many new and existing power projects are stuck due to unavailability of natural gas. The gas shortage has hurt other industries, such as fertilizer and steel, as well.

The fuel crunch has also forced the federal government to advise local power companies to not plan domestic gas-based projects until March 2016.

Shell and Reliance Power together hold a majority stake in the consortium that will set up the 5.0 million tpy capacity floating terminal, the Indian company said in a statement.

Kakinada Seaports, the operator of the Kakinada deepwater port in eastern Andhra Pradesh state, holds a minority stake in the consortium.

The terminal is expected to start operations by 2014 and its capacity may be doubled to 10 million tons later, Reliance Power said.

According to industry estimates, the terminal may cost the consortium as much as $1 billion.

Shell currently operates a 3.6 million tons terminal on India's west coast, at Hazira, in a joint venture with France's Total and is expanding its capacity to 5.0 million tons.

The agreement would boost Reliance Power's business as it would get assured LNG supply to power its upcoming 2.4 GW project in Andhra Pradesh.

The company operates 1.2 GW coal-based power projects in northern India and has planned several other coal-fired plants.

Dow Jones Newswires