Petronet LNG working on Gangavaram's commercial structure

The commercial structure will require at least 40% of the 5 MTPA capacity committed to the local market, or through tolling arrangement

Indian oil and gas company Petronet LNG today said it is working on a commercial structure of its proposed Gangavaram terminal on the east coast of India and expected to commence construction in about six months.

"We are working on the commercial structure including the pipeline connectivity before constructing the plant," Petronet LNG Finance Director R K Garg said here on the plant that will come up near Visakhapatnam.

The commercial structure would require at least 40% of the 5 million tonne per annum (MTPA) capacity committed to the local market, or through tolling arrangement, he said.

The Infrastructure and Investment Department of the Government of Andhra Pradesh has accorded permission to Gangavaram Port to set up an LNG terminal in joint venture with Petronet. The project has already received related approvals including environment clearance.

The construction would also require assurance of pipeline connectivity to the regional market on the east coast, he pointed out.

The Gangavaram terminal, expected to cost Rs 4,500 crores, would raise Petronet LNG import capacity to 25 MTPA.

Speaking to reporters at the CWC's 6th World LNG Series here, Garg said: "Petronet LNG would keep its LNG procurement options open, taking in about 70-75% on long-term contracts and the rest from the spot market."

The spot market procurement would provide flexibility in LNG prices which would benefit consumers in the Indian market, he pointed out.

"We are (always) interested in different sources - traditional Middle East suppliers or others including those in Russia, Mozambique and even the United States.

"It is good for the country to have availability of LNG from different sources, and especially for energy security," he told reporters after addressing the conference, held 23-25 September.

He also said coal, including imported, continues to be more cost effective for the Indian power generation sector.

Of the 200,000-megawatt of installed capacity, only 10% or 20,000-MW was currently using natural gas.

LNG remains an expensive option for power sector, unless it is priced at USD 10-11 per million Btu.

Most of the LNG imported into India was being used for non-power sector, including fertilisers.

Garg said 16 MTPA of Petronet LNG's current capacity was already committed to the market.