GAIL to use 2.5 mln T/yr capacity at Petronet's Dahej plant

* Other firms also eyeing capacity to import LNG at Dahej

* Petronet may join GAIL if it gets Repsol's LNG assets

NEW DELHI, Oct 8 (Reuters) - India's Petronet LNGhas allowed gas firm GAIL (India)to use annually 2.5 milliontonnes capacity at Petronet's liquefied natural gas (LNG) plantat Dahej in western India for importing the fuel, its chiefexecutive A. K. Balyan said on Monday.

GAIL has recently struck a 20-year deal with Russia'sGazprom to buy 2.5 million tonnes of LNG but it does not operatean LNG terminal.

With gas demand expected to grow 14 percent in the nextfive years, Asia's third-largest economy is scouting forlong-term LNG contracts, and aims to raise its LNG handlingcapacity to 50 million tonnes a year by 2017 from 13.5 millionnow.

Petronet operates a 10-million tonne a year LNG terminal atDahej and plans to expand it to 15 million tonnes a year in2015. It is also building a 5-million tonne a year plant atKochi in southern India.

"GAIL will get gas at our Dahej terminal. We have given 2.5million tonne capacity in our Dahej expansion project to GAIL,"Balyan told Reuters.

A source at Petronet LNG said companies including GujaratState Petroleum Corp were also in talks with his firm to use theremaining 2.5 million tonnes capacity it plans to add.

Problems at the Reliance Industries -operated D6block, off India's east coast, have curtailed domestic gasoutput while state-run Oil and Natural Gas Corp (ONGC) strugglesto arrest declining production from its ageing field.

A consortium of Indian firms - ONGC , Indian OilCorp and Petronet - wants to buy a 15 percent stake inRussia's Yamal LNG project, Balyan said in July.

GAIL is considering buying LNG assets put up for sale bySpanish firm Repsol in Canada, Peru and Trinidad.

Balyan said Petronet may join GAIL to operate Repsol's LNGassets if the Indian company acquired them.

(Reporting by Nidhi Verma; editing by James Jukwey)

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