Petronet LNG’s Kochi plans hit a rough patch

Petronet LNG’s Kochi plans hit a rough patch
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First Published: Tue, Sep 25 2007. 01 00 AM IST
Plans of Petronet LNG Ltd, India’s leading liquefied natural gas (LNG) receiving and regasification company, to source 2.5 million tonnes per annum (mtpa) of gas from Australia at a rate of $4.50 (Rs179.55) per million British thermal units (mBtu) for 25 years has suffered a setback.
The Chevron Corp.-operated Gorgon project in western Australia has witnessed a doubling of investment costs to $16 billion, which is likely to push up gas prices.
“We expect to finalize the contract by next year,” said an official close to the developments, who did not wish to be identified. “However, we may not get it at the price that we want to.”
With the economy expected to grow above 9% annually, natural gas imports into India are expected to increase from 5mtpa to 20mtpa by the end of 2012 amid growing demands from sectors such as power, fertilizer and cement.
“Gas demands worldwide are increasing with the supplies being limited,” said Prayesh Jain, an analyst at stock market research firm India Infoline Ltd. “In such a scenario, the suppliers will demand a premium.”
Jain added that further delays in finalizing gas supplies will also have a direct effect on the commissioning of the company’s proposed second LNG facility at Kochi, which would have a 2.5mtpa capacity, that is scheduled to be commissioned in 2011. However, Petronet officials say the issue of gas supplies will not have any effect on the commissioning of the terminal.
The project already has seen a 75% cost escalation from the earlier proposed investment of Rs2,000 crore. The terminal, for which the land has already been allocated by the Kerala government has a provision to expand to 5mtpa. India has only two LNG regasification terminals—both in Gujarat. One is owned by Petronet (capacity of 6.5mtpa) and the other by Shell India Pvt. Ltd (2.5mtpa). Other terminals planned include one attached to the Dabhol project (5mtpa), and one each in Kochi (5mtpa) and Mangalore (5mtpa).
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First Published: Tue, Sep 25 2007. 01 00 AM IST