Petronet LNG Ltd, the nation’s largest natural gas importer, is in talks to set up a Rs 3,500-crore power plant adjacent to its upcoming LNG import facility at Kochi in Kerala.

Petronet has proposed to set up a 1,200 MW gas-fired power plant, 50:50 joint venture with the Kerala government, sources privy to the development said.

Kerala, which faces power shortages, is willing to partner Petronet and the land it will give for setting up of the power plant would be considered as part of its equity contribution in the project.

Also, the state government has shown inclination towards accepting Petronet’s condition of buying at least 75 per cent of the power generated at the power plant under a long-term power purchase agreement or PPA.

Sources said the power generated at the plant, which would use liquefied natural gas (LNG) imported from Australia as fuel, would be priced at less than Rs 7 per unit, much cheaper than Rs 11 per unit the state government is currently buying power from some private generators.

Three units of 350 MW each would be set up in 48 months but operationally it will generate 1,200 MW of electricity.

MoU for the project is likely to be signed between Petronet and the state government shortly, they said, adding a detailed feasibility report would be prepared subsequently.

For Petronet, the power plant would be a blessing in disguise as it would consume most of the high-priced LNG it has contracted from Gorgon project in Australia.

The firm had in 2009 signed a pact to buy 1.5 million tonnes of LNG at a price equivalent to 14.5 per cent of prevailing international oil price.

At $100 per barrel oil price, the LNG will cost $14.5 per million British thermal unit at the time of loading in ships on the Australian ports.

After adding $1.25-1.5 per mmBtu in shipping or transportation cost and 5 per cent import/customs duty, the landed price of gas will be $16.5 per mmBtu.

The prices of the fuel to consumer after adding local transportation, taxes and other charges will cost about $19-20 per mmBtu or more than three times the delivered price domestic gas.

Sources said the 5 million tonne a year Kochi terminal, which was originally scheduled for mechanical completion in second quarter of 2012-13 fiscal, is now being targeted for finishing by the year end to synchronise it with building of pipelines that will take the gas to consumers.

GAIL India Ltd is running behind schedule in laying of pipelines that will connect Kochi import terminal to major power and fertiliser consumers.

(This article was published on July 29, 2012)
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