Ennore LNG terminal seen by 2009

The storage terminal for liquefied natural gas (LNG) being set up in Ennore near Chennai is likely to be completed in 2009.

The project is jointly promoted by the Indian Oil Corporation (IOC) and Chennai Petroleum.

IOC currently is looking for a consultant to prepare a detailed feasibility report for the project, said S V Narasimhan, managing director, Chennai Petroleum.

He added that the initial storage capacity would be 2.5 million tonne. Subsequently, the storage capacity would go up to 5 million tonne. The LNG stored in the terminal would be imported.

He said that it was not possible to reveal the cost of the project, as the promoters are negotiating with Tamil Nadu government for concessions.

The state government's decision would have a bearing on the cost. The detailed feasibility report generally takes about 6 to 9 months to finish.

GAIL is also expected to invest in the project. The feasibility report would study the ways to distribute LNG from the storage terminal. GAIL is expected to play a role in the distribution.

LNG demand is expected to be driven by fertiliser companies and companies in power generation as a replacement for costlier liquid fuels such as naphtha.

Currently, the project's promoters have received expressions of interest in LNG purchase from companies with factories in and around Chennai.

Ashok Leyland, SPIC and PPN Power are among the companies that have expressed interest. The Tamil Nadu Electricity Board is also interested in creating a LNG based power plant. Narasimhan said that 1 million tonne of LNG would cover 1,000 mw of power.

Narasimhan said that about 0.7 million tonne of LNG from the terminal would be used for Chennai Petroleum's captive power plant, and also sold to Madras Fertilizers. Madras Fertilisers currently uses Chennai Petroleum's naphtha as feedstock for its fertiliser operations.

IOC holds a 51.8 per cent equity stake in the company. Chennai Petroleum's refineries in Chennai and Nagapattinam with a combined capacity of 10.5 million tonne are IOC's only refineries in south India.

The other significant shareholder is the National Iranian Oil Company which controls about 15.4 per cent of the equity.