The Hindu Business Line : NTPC involvement vital for success of Kochi LNG project

THE Union Power Minister's recent assurance to the Chief Minister that the proposed 2.5 million tonne LNG terminal here would be an "Onam gift" to the State has given rise to the question: Who will set up the terminal - NTPC or PLL?

For setting up the terminal, the Union Government approved the formation of PLL in July 1997 with equity participation of ONGC, IOC, BPCL, GAIL, LNG Supplier, strategic partner and public with an authorised capital of Rs 1,200 crore.

The company was incorporated on April 2, 1998. The PLL had obtained all the clearances from the State and Central departments/ministries for setting up the Kochi terminal. The NTPC was considered as the anchor customer as it is planning to expand its Kayamkulam thermal power from 350 MW to 2,300 MW by switching over to LNG from high cost naphtha.

But NTPC has so far been non-committal on sourcing LNG from the Kochi terminal, official sources told Business Line. NTPC has shortlisted six firms, including PLL, out of 18 bidders for supply of LNG. The Corporation is understood to be looking for the lowest price offer, through bidding process and hence had not made a commitment to PLL, they said.

Given this situation, a commitment from the NTPC is possible only at the intervention of the Union Power Ministry, it is pointed out. On the other hand, if NTPC brings in LNG on its own, it won't be able to sell it outside, they said. Since the PLL comes under the Petroleum Ministry and the NTPC is under the Power Ministry, industry sources here are of the opinion that if PLL and NTPC jointly set up the terminal, the stalemate could be broken.

According to GAIL, which would be carrying LNG throughout the country through its pipelines, there is a potential demand of 4.92 million standard cubic metre daily (MMSCMD) of LNG from existing plants, such as BSES, FACT, NTPC and DC power. The demand from NTPC, when its thermal plant at Kayamkulam is expanded, will be an additional 7 MMSCMD.

The PLL, which recently gave an assurance that it will not shift the project from here, had earlier been insisting on the State Government to ensure the sale of 70 per cent of the LNG from the terminal proposed to be set up here at a cost of Rs 1,600 crore.

The Kerala State Industrial Development Corporation had appointed FACT Engineering and Design Organisation to conduct a market study to find out enough buyers for the LNG in the event of NTPC backing out.

All pre-project activities of the terminal have been completed, including obtaining the required clearances. According to PLL sources, the company had already invested about Rs 30 crore for the project to be set up at Puthuvypeen Island where land has already been allocated by the Cochin Port Trust (CPT).

Given this situation, a joint venture between PLL and NTPC might translate the LNG project in to a reality.

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