Looking for LNG to fire the dormant Dabhol plant

Vol 8, PW 25 (23 Mar 05) Midstream & Downstream

Moves are afoot to ensure a steady supply of LNG to the Dabhol power plant when it comes back on stream, hopefully by the governments deadline of June 2006.

On 24th February the oil ministry set up a committee to secure LNG supplies for Dabhol. It includes GAIL chairman and managing director Proshanto Banerjee, Petronet LNGs outgoing managing director Suresh Mathur and ICICI Banks executive director Kalpana Morparia.

The committee will take immediate steps to identify available sources of LNG at competitive prices so that supply can begin latest by mid 2006, writes Swami Singh, a director with the oil ministry. Special efforts will be made to source the supply from Abu Dhabi Gas SPA and Oman LNG LLC.

Oman LNG and ADGAS were the original LNG suppliers to Dabhol and signed contracts in 1998 and 1999 respectively. Efforts may also be made to locate supplies from Qatar and Yemen or other countries, adds Singh.

Unlike LNG for Dahej - imported FOB - the ministry is open to the idea of short-term CIF contracts of five to ten years for Dabhol. The cabinet secretariat has asked us to limit the sourcing to the Gulf so that transportation costs are reduced, an oil ministry source adds.

The committee will have to impress upon Gulf suppliers the advantages of higher net back from such a deal. Committee members have been asked to follow a two-pronged supply strategy to secure LNG for Dabhol: short-term contracts of five years or more favourable long-term contracts of 15 to 20 years.

The cabinet secretariat has given us a free hand to explore all possible channels including business and diplomatic areas to secure this deal.