World's number three oil and gas group Royal Dutch Shell's plans to set up petrol stations in India have received a shot in the arm with the petroleum ministry clearing its proposal to import petrol and diesel.

"They (Shell) had approached us for permission to import petroleum products for retailing. We have no objection to it and will soon approach the commerce and industry ministry for the necessary amendment in the Exim Policy," highly placed petroleum ministry officials said in New Delhi.

Shell India has, however, not formally applied for rights to sell petrol and diesel, they said adding the company officials have indicated setting up around 1500 retail outlets to begin with.

At present, petroleum product import is allowed only through Indian Oil. Though crude oil imports had been de-canalised last year, petro product imports remained under canalised category as imported petrol and diesel could be sold at a cheaper rate under the given duty structure.

"Duty structure too would be changed accordingly," sources said.

Shell, which operates more than 46,000 petrol stations and has interests in about 50 refineries worldwide, is likely to get marketing rights in lieu of its proposed investment in setting up the 5 million tonnes capacity Hazira LNG terminal.

Marketing rights to retail petrol and diesel are contingent on investment of a minimum Rs 2,000 crore (Rs 20 billion) in oil infrastructure.

Despite repeated attempts, Shell India spokesperson was unavailable for comments.

Sources said Shell India had indicated that it would import petrol and diesel at its Hazira port in Gujarat from its 430,000 barrels per day Bukom refinery in Singapore. Some 90 per cent of Bukom's products are exported in the region and beyond.

"Shell India had also sought clarifications on refund of bank guarantee. We have no problem with that too and would refund it if the company accomplishes pre-set milestones in a given timeframe," they added.

As per rules, companies proposing to invest Rs 2000 crore in oil exploration, refining and terminals are required to furnish a bank guarantee of Rs 500 crore (Rs 5 billion) for obtaining authorisation to retail petrol and diesel.

Eight companies including Reliance Industries, Essar Oil, Cairn Energy, Oil and Natural Gas Corporation and Oil India had qualified for grant of petro marketing rights for already investing Rs 2000 crore.

Out of these, RIL has received authorisation to set up 5849 retail outlets, Essar Oil 1700 and ONGC 600. Besides, Numaligarh Refinery too has got marketing rights.

Sources said Shell India was likely to procure petro retailing rights in lieu of its proposed investment of $500 million in setting up LNG terminal at Hazira, Gujarat.

The company is setting up a five million tonnes per annum capacity LNG terminal at Hazira, which is scheduled for limited operation (2.5-2.6 million tonnes) in 2004 and full-scale operation in December 2006-07.

About 25 per cent of the construction activity has been completed at the project site and contracts for construction of LNG regassification and storage tanks have been placed. LNG would initially be sourced from one of Shell's equity projects in Asia-Pacific region and a long-term dedicated supply project, most probably in the Middle-East, would be put up at a latter stage, sources said.

Orders for four 135,000 mm LNG carriers have already been placed by Shell with Mitsui Heavy Industries of Japan and Daewoo of Korea. The first LNG carrier is expected to be delivered in the second half of 2003.

It has spent over $30 million in incorporating companies, physical activities at site, development costs and consultancy, sources said.