The Hindu Business Line : Buyers insist on firm base price for gas from Kochi LNG terminal

THE current stalemate in setting up the LNG terminal in Kochi by Petronet LNG Ltd (PLL) could be broken if PLL comes out with a firm base price for the gas it would be supplying from the proposed Kochi terminal.

According to some of the participants at the joint working group meeting held here on Wednesday and attended by representatives from GAIL, PLL, Fertilisers and Chemicals Travancore Ltd (FACT), KRL, BSES and Kerala State Industrial Development Corporation (KSIDC), the main bottleneck for commitment by potential buyers is the absence of a firm base price. The participants were of the opinion that once the terminal was set up, the market would come up. According to GAIL, potential buyers of natural gas in the State were the existing units such as BSES, FACT, DC and NTPC.

The total estimated requirement of these units would come to 4.92 million standard cubic metres per day (mscmd) Even without NTPC, the demand would be to the tune of 3.52 mmscmd. Besides, KRL would also be a prospective buyer, sources said.

"In fact, there exists the required market and even more, without NTPC," the participants claimed. On the other hand, it could be marketed as automobile and cooking fuel in the State, they said.

For the ailing FACT, if LNG was made available at moderate prices, it will help the company improve its financial performance as it is currently buying naphtha at $7 - $8 million British thermal units (mmbtu) and furnace oil at $ 6 mmbtu, company sources told Business Line.

Similar is the situation with other potential buyers such as BSES Kerala Power Ltd with a capacity of 150 MW. "But how can these companies give a firm commitment without knowing the base price," the sources asked.

The PLL Board has to take a decision on this matter. The company has been insisting that the State Government ensure the sale of 70 per cent of the LNG from the 2.5-million tonne terminal proposed to be set up here at a cost of Rs 1,600 crore.

Petronet LNG has announced a base price of $3.5 mmbtu for supply in Gujarat and if it was brought over to Kochi by the GAIL pipeline, the cost would be higher, they said. GAIL would be laying the LNG gas pipeline in Kerala covering a distance of 535 km to Coimbatore and Mangalore. Acquisition of land for this purpose has commenced. GAIL had already solicited the support of the State Government for the introduction of auto LPG/CNG in Kochi.

Apart from this its demands also included allocation of sites for setting up Auto LPG Dispensing Stations (ALDS) on priority for long lease at the State Government rates; introduction of single-window clearance/approval required for ALDS; and reduction in taxes/duties on auto LPG, commercial kits.

All pre-project activities of the terminal have been completed, including obtaining all the required clearances.