Petronet LNG plans second power plant

Petronet LNG plans second power plant

New Delhi: Petronet LNG Ltd, India’s leading liquefied natural gas (LNG) receiving and regasification company, is looking to accelerate its diversification strategy by proposing a second 1,000MW gas-based power project at its proposed Kochi LNG terminal.

This is the second power project that the company plans to set up after the one proposed at Dahej LNG regasification terminal.

“We have realized that the gas-based power projects near the LNG terminals are more efficient in nature. We will also be getting fiscal benefits by setting up the project," a senior company executive, who did not wish to be identified, said.

By setting up the power project, the company will not have to pay 12.5% as value added tax (VAT), no marketing margins and no transportation charges within the country for the gas utilized for the power plant.

This, according to the company executive, will result in a saving of at least $1 (Rs39.4) per million British thermal units (mbtu).

The company’s proposed second LNG facility at Kochi, would have a 5mtpa capacity, and is scheduled to be commissioned in 2011.

This strategy stems from the company’s limitation in storing LNG at its facility and using the spare capacity to add to its revenues.

The company executive added that it plans to leverage synergies with the proposed LNG terminal in reducing the cost of putting up a power plant and thereby peg the price of electricity generated at the plant to Rs2.75 to Rs3 per unit.

“With so much of domestic gas coming in as projected, the potential of too many regasification facilities will be limited. Keeping this in mind; the next level of growth for Petronet will come from the power sector. With the feedstock comfort that the company has, this is very logical," said Ajay Arora, partner at accounting firm Ernst & Young.

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).