Uility Reliance Power, controlled by billionaire Anil Ambani, is in talks with energy major Royal Dutch Shell to jointly set up a liquefied natural gas LNG.L terminal to secure supplies for its gas-fired power plant, a person with direct knowledge of the matter said.

Earlier on Tuesday, The Economic Times reported the two companies were in talks to jointly set up an LNG terminal.

"Reliance Power keeps exploring various business opportunities. The company would not like to comment on specific business proposal," the utility said in an e-mail response to Reuters.

A Shell India spokeswoman did not respond to phone calls seeking comment.

Reliance Power is in talks with Shell to form a joint venture in which the two companies will hold equal stake and Kakinada port in the southern Andhra Pradesh state will own a minority stake, the source with knowledge of the matter said.

The proposed venture will likely invest Rs 30 billion to set up an LNG terminal at Kakinada on India's east coast and would import and supply gas initially to Reliance Power's 2400-megawatt, gas-fired plant in Andhra Pradesh, slated to come onstream in 2012, the source said.

India's gas-based power plants are facing uncertainty over fuel supply as gas output from the D6 block operated by Reliance Industries, off India's east coast, has declined, forcing power producers to look for other substitutes.

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