India’s Kochi LNG terminal project faces off-take uncertainties

18 April 2013 09:45  [Source: ICIS news]

KOLKATA (ICIS)--Petronet LNG Limited’s (PLL) liquefied natural gas (LNG) storage and regasification terminal project in the port town of Kochi faces uncertainty over lack of distribution infrastructure and end users unpreparedness, an official of joint venture partner GAIL India Limited said on Thursday.

The mechanical completion of the $800m (€616m) LNG project in southern India was just three to four months away but users who have signed off-take agreement with PLL were yet to start their own projects for switching from naphtha to natural gas feedstock, the official who asked not to be identified told ICIS.

At the same time, distribution infrastructure undertaken by GAIL to connect the terminal to industrial hinterland covering southern Indian provinces of Kerala, Tamil Nadu and Karnataka has run into farmers’ opposition to the pipeline over their land, the official said.

Fertilizer and Chemicals Travancore Limited (FACT), which had concluded a gas purchase agreement was yet to commence work on switching feedstock from naphtha to gas for production of fertilizers, even though the Indian government had given approval for the switchover last year.

According to a fertilizer industry official, most producers switching feedstock had been tardy in submitting their production cost differentials to the government based on which subsidies would be determined and hence the delays in implementation.

At the same time, connecting the LNG terminal at Kochi to Bangalore in Karnataka had also been stalled owing to farmers protest in Tamil Nadu against a pipeline cutting across their farmlands, the official added.

GAIL was currently constructing a $647m gas distribution network for the Kochi terminal entailing a pipeline running 505kms through Kerala, 310 kms in Tamil Nadu and 85 kms in Karnataka.

Another anticipated bulk user project, a $550m natural gas power generation plant integrated to the LNG terminal was yet to get off the ground with no decision taken by any private or government investor, the GAIL official said.

PLL, is a joint venture between gas and oil infrastructure major GAIL, oil refiner and marketers Indian Oil Corporation (IOC) and Bharat Petroleum Corporation Limited (BPCL), oil exploration and producer ONGC Limited.

The LNG terminal had initially been planned for 2.5m tonne/year but had been subsequently ramped up to 5m tonne/year during implementation stage but uncertainties over actual off take close to start-up date was likely to force PLL to take a re-look at negotiations on supply contracts for import of LNG, the official said.

Author: Ajoy K Das

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