The Hindu Business Line : Doubts over gas supply — Vizag Steel mulls alternative plans to expand capacity

Gearing up to expand the liquid steel capacity from 3.4 million tonnes to 5 million tonnes by the end of 2007 by using natural gas, the company has now asked the project consultant, Mr M.N. Dastur, to prepare an alternative plan which will be adopted if natural gas is not available latest by mid-2006.

Estimated to cost roughly Rs 2,000 crore, the expansion project will be submitted for approval of the Union Ministry of Steel by November. "We have requested our consultant to finalise the plans by October," Mr B.K. Panda, Chairman and Managing Director of Vizag Steel, told Business Line.

As per the original plan, Vizag Steel requires 1.5 million cubic metres of natural gas enriched with oxygen to increase the existing blast furnace production from 3.8 million tonnes to 5.5 million tonnes of hot metal.

Accordingly, negotiations have already been held for supply of gas through pipeline from Rajamundhry with the Gujarat State Petroleum Corporation, which is exploring for natural gas in the Krishna-Godavari basin (on the Andhra coast). Further, the company is planning to enter into an MoU with GAIL for the required gas supply.

Discussions have also been held with BOC and Praxair to set up an additional 3000-tonne per day oxygen capacity on a build-own-operate (BOO) basis.

The plan was prepared and approved by the Vizag Steel board of directors with the objective of reducing dependence on imported metallurgical coal (which is in short supply) and reducing the production cost as well. The company has no captive coal or ore blocks and incurs one of the highest raw material costs in the entire steel industry.

Even if made available at the existing global price of $3 per million British thermal unit (MMBTU), usage of gas is expected to be cheaper for Vizag Steel against the final cost of coal (after handling at the plant end). According to one estimate, the use of gas would enable the company to save at least 10 per cent of the coal bill. "It is a proven technology and is in vogue in many steel plants in Russia," the company said.