Financial Daily from THE HINDU group of publications
Friday, Jul 16, 2004
Industry & Economy
Kochi LNG project in a limbo again
Kochi , July 15
THE proposed 2.5 million tonne LNG terminal, to be set up by the Petronet LNG Ltd (PLL), here is likely to be delayed despite an assurance from the Union Power Minister recently that the terminal would be an "Onam Gift" to Kerala and the PLL CMD's statement that his company would go ahead with the terminal.
In a letter to Mr Chandran Pillai, CITU leader and M P (Rajya Sabha), the Union Petroleum Minister has said that the terminal would come up if the PLL tender becomes acceptable to the NTPC or there were other users to absorb 60 per cent of the capacity of the terminal.
"As LNG projects have strict `Take or Pay' Clause, PLL will take steps to execute the project if either their bid is accepted by NTPC or alternative marketing tie-ups for atleasst 60 per cent of the proposed terminal capacity is achieved," the letter said.
"The Minister's response will adversely affect the future of the proposed terminal," Mr Pillai told Business Line from Delhi. He said that the Union Government should initiate steps to make the NTPC the anchor customer of the terminal.
According to him, there are chances that the terminal would be shifted to Kayamkulam where the NTPC has its power plant, which would be expanded to 2,300 MW using LNG in the next Plan from the present naphtha-fuelled 350 MW.
Since an international container transhipment terminal is expected to come up in Kochi soon, locating the LNG terminal here at a faster pace would be in the interest of the industry in the State, he claimed.
Surprisingly, he said, GAIL, which is a stakeholder in PLL had also participated in the tender for supply of gas to NTPC.
The Union Government approved the formation of PLL in Jul 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.
Meanwhile, Mr S.C. Mathur, Managing Director, PLL, told Business Line last week, "We will go ahead with the project and we need only a 60 per cent tie-up of our capacity".
GAIL and the Kerala State Industrial Development Corporation together are already on the job to identify the assured market.
The NTPC has already shortlisted eight firms, including PLL and GAIL for supply of LNG, out of 18 bidders. The corporation is understood to be looking for the lowest price offer, through bidding process and, hence, cannot make a commitment to PLL, official sources said.
Thus, in the absence of a commitment from the NTPC or a 60 per cent assured market, the PLL might not be able to go ahead with the proposed terminal, they said.
Hence, according to Mr Chandran Pillai, now the future of the Kochi terminal lies in the hands of both these Ministries and unless they jointly decide to go ahead with this project it is unlikely to be translated in to a reality in the near future.
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