Hoping for lower R-LNG prices at FACT

Vol 16, PW 13 (24 Jan 13) Midstream & Downstream

Fertilisers and Chemicals Travancore (FACT) is betting on global LNG prices coming down in coming years so it can use R-LNG at two new urea factories.

State-owned FACT will need at least 2.8m cm/d for its proposed Udyogmandal and Ambalamedu urea factories at Kochi in Kerala. Udyogmandal will need 800,000 cm/d of gas as feedstock to produce 1500-tonnes/day of urea; Ambalamedu will need 2m cm/d to produce 3500-tonnes/day.

Subsidiary FACT Engineering and Design Organisation prepared DFRs for both factories last year, reports a company source. FACT estimates Udyogmandal will cost Rs1000cr ($200m) and Ambalamedu will cost Rs3500cr ($700m).

Both projects were approved by the FACT board last year, but fertiliser ministry clearances are still awaited. Once these are in, the factories will take 36 months to build.

“Government approval should come soon,” says FACT. “Enough land and infrastructure is in place.

” FACT has reconciled itself to using expensive R-LNG as cheap domestic gas is getting scarcer by the day across India. Imported urea costs $400/tonne but urea produced using R-LNG at current prices of around $19/mmbtu will cost $500/tonne.

Yet FACT feels global LNG prices will fall to $14/mmbtu within three years. Besides, FACT’s feedstock costs will be reimbursed through government fertiliser subsidies.

FACT is also hoping for some R-LNG from GAIL at $9/mmbtu under its Henry Hub benchmark-linked shale gas import contracts with the US. FACT is talking to two or three Indian companies about jointly setting up Udyogmandal.

“We invited EoIs last August for 50% joint venture partners at both sites,” we hear. “We received nine responses for Udyogmandal, none for Ambalamedu.