Supplies tied up, Kochi LNG terminal work to start soon

Work on the Kochi liquefied natural gas (LNG) terminal is likely to begin soon after a delay of more than a year and a half. It will be India's fourth LNG terminal.

Currently, there are two functioning LNG terminals in Gujarat, the 6.5-mtpa (million tonnes per annum) Petronet terminal and the 2.5-mtpa Shell terminal. The third one is coming up at Dabhol in Maharshtra.

While there are a few more terminals in the pipeline, industry experts say all of them may not be constructed since India will be gas surplus soon.

Besides, it is not easy to secure long-term LNG supplies, which is holding up the Mangalore terminal, to be built by Oil and Natural Gas Corporation (ONGC) and the Indian Oil Corporation's (IOC's) Ennore terminal.

The Kochi project was delayed also due to the problems in firming up long-term LNG supplies to feed the terminal. Petronet is now in the final stages of negotiation to import 2.5 mtpa LNG from the Chevron-operated Gorgon project in Western Australia for 25 years.

The engineering, procurement and construction (EPC) contract for the Rs 2,500-crore terminal is likely to be awarded to Japan-based Ishikawajima-Harima Heavy Industries (IHI), the only company that has bid for the contract.

"We are doing technical negotiations with IHI. The contract will be awarded by September 30," said a senior official with Petronet, which will own the terminal.

The project has been delayed due to the time taken in firming up long-term LNG supplies. Petronet is now in the final stages of negotiations to import 2.5 mtpa LNG a year from Chevron-operated Gorgon project in Western Australia for 25 years.

The Petronet official said the work could be started soon after the EPC contract was awarded if the Kochi Port Trust agrees to sign the concession agreement, which will authorise Petronet to construct on the port's property. The terminal is likely to be commissioned by 2011.

Lease of life for Ennore

There is also progress on the as economically unfeasible. IOC is close to signing an agreement with Petronet LNG for the 2.5 mtpa terminal. IOC close to signing an agreement for a pre-feasibility study with Petronet LNG.

"For a terminal that is expected to cost around Rs 3,500 crore, we will need to look at every angle," said a Petronet official. Recent gas discoveries in India have diluted the case for setting up new LNG terminals. Besides, there is the issue of securing long-term LNG supplies.

For example, Oil and Natural Gas Corporation (ONGC) is reviewing its plan to invest in an LNG terminal at Mangalore.

"Only if we manage to source LNG through a long-term contract, the terminal would move forward. At the moment, global LNG prices remain very high," a senior ONGC official said.

The demand for gas in the country "" around 48.57 mtpa "" is much more than the current availability of around 24.28 mtpa. The government has predicted that by 2011-12, the supply, at 81.55 mtpa, will exceed the demand of 79.84 mtpa. Besides, of the total availability, 23.75 mtpa is projected to be from LNG.