NTPC Ltd, India’s leading power generation company, has said no to a proposal from GAIL (India) Ltd, the country’s leading gas pipeline infrastructure firm, to jointly operate the LNG terminal of the Ratnagiri Gas and Power Project Ltd (RGPPL) in the event of this being hived off.
NTPC wants to acquire the liquefied natural gas terminal for itself as it needs a regasifcation facility to bring in a supply of LNG from Nigeria. Acquiring an existing terminal would be easier than building one for a company that has never set up a regasification terminal before. “We are not willing to partner with them (GAIL) for the terminal. It is now for the government to decide the reserve price for the terminal for which we plan to match the highest bid,” said an NTPC executive who did not wish to be identified.
“We are open to participating with NTPC for the terminal conditional to the cost-benefit analysis that we have undertaken,” said U.D. Choubey, chairman and managing director, GAIL, on the sidelines of a press meet here. Another senior GAIL executive who did not wish to be identified said that according to this analysis the company would be interested in operating the terminal only if its cost is capped at Rs2,850 crore.
However, the projected cost of the terminal has already escalated to Rs4,000 crore. The terminal for liquefied natural gas is part of the controversial 2,160MW Dabhol power project which is likely to start generating electricity using gas as fuel from the second week of August.
The empowered group of ministers (eGoM) on Dabhol is expected to meet shortly to take a decision on how to bridge the project’s revival cost which has escalated by Rs2,594 crore to Rs12,897 crore. One of the options before it is to hive off the LNG terminal, for which there are several takers, and use the proceeds to bridge the escalation cost on the project.
NTPC and GAIL are the two leading stakeholders in RGPPL, with each holding a 28.33% stake. Other stakeholders include Maharashtra State Electricity Board (MSEB) that owns 15% and lender banks (IDBI Ltd, State Bank of India, ICICI Bank and Canara Bank) which have minority stakes.
An energy sector analyst based in Delhi who did not wish to be identified said GAIL and NTPC would derive the benefits of synergy if they formed a partnership to operate the terminal. “GAIL has the pipeline infrastructure in place and is scouting around for long-term gas supply of gas. NTPC has secured the gas supply. It makes sense for both to partner with each other,” he added.
India only has two LNG regasification terminals. LNG is transported in liquid form (usually by ship) and needs to be converted into gas before it is used. Both terminals are located in Gujarat and are owned by Petronet LNG and Shell India. The Dabhol terminal will initially have a capacity of 1.2 million tonnes per annum (mtpa), which will be increased to 5mtpa by 2010.
In a related development, GAIL is in talks with Sonatrach of Algeria for import of 2.5-5mt of LNG on a long-term basis from 2010. The Dabhol terminal is also scheduled to be ready by then.