India’s Petronet LNG to lease out Kochi storage terminal capacity

27 November 2013 09:25  [Source: ICIS news]

KOLKATA (ICIS)--India’s Petronet LNG Ltd intends to lease out the liquefied natural gas (LNG) storage tanks at its terminal in Kochi province to cut losses stemming from low capacity utilisation, a government official said on Wednesday.

Less than a fifth of the terminal’s 5m tonne/year capacity is being utilised, the official from the Ministry of Petroleum and Natural Gas said.

The terminal was commissioned in August 2013 and has received only two shipments of imported LNG – with volumes totaling 261,000 cubic metres – as of mid-November, the official said.

It does not have enough customers in the absence of distribution pipeline to industries in the hinterlands of southern India, namely, the provinces of Kerala, Tamil Nadu and Karnataka, he said.

Petronet LNG requires a minimum capacity utilization of 70% to break even on cost, but a lack of distribution infrastructure makes this impossible to achieve, the official said.

Without customers offering guaranteed off-take  agreements, long-term contracts for LNG imports are also difficult to come by, the official said.

A heavy reliance on spot contracts could do more harm than good to the finances of the Kochi terminal, the official said.

A protest by farmers halted the building of GAIL India’s distribution infrastructure that was supposed to connect the Kochi terminal with industries in the region.

GAIL was implementing a $647m (€479m) pipeline network of 505 kilometres (km) through Kerala, 310km in Tamil Nadu and 85km in Karnataka.

Continued opposition to the building of the pipeline would cause substantial delays in its completion, which was slated in March next year.

GAIL might decide to call off the pipeline project if opposition was not resolved within reasonable period of time and deal a further blow to Kochi terminal’s capacity utilisation, the official said.

Petronet LNG is a joint venture of Indian government-owned companies in the oil and gas sector, namely GAIL, ONGC Ltd, Indian Oil Corp Ltd and Bharat Petroleum Corp Ltd.

($1 = €0.74)


Author: Ajoy K Das

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