Pradhan's final nail in Gangavaram LNG coffin

Vol 19, PW 17 (05 May 16) Midstream & Downstream
     

If you are wondering whether or not the Gangavaram LNG project will ever go ahead you have your answer.

Oil minister Dharmendra Pradhan has decisively put the project on hold citing Petronet-LNG's inability to find an anchor customer. On April 16 Pradhan conveyed his decision to Dr KVP Ramachandra Rao, a senior Congress MP from Telangana who has been lobbying hard for the project to go ahead.

Pradhan explained there has neither been any firm offer to book capacity nor any to buy R-LNG. In reply to a question raised by Rao on government steps to ensure the speedy industrialisation of north coastal Andhra Pradesh, Pradhan replied curtly: "LNG terminals are developed based on techno-commercial viability by the entities concerned." Pradhan wants Petronet-LNG managing director Prabhat Singh to first sign up firm customers for at least 45 to 50% of the R-LNG to be evacuated daily.

"AK Balyan [Singh's predecessor] was bullish on demand potential in the region," a Petronet-LNG source tells us. "But after the fiasco at [the stranded] Kochi [LNG terminal] just being bullish is not enough." Demand assessment studies by Petronet-LNG over the past two years put R-LNG demand at 19m to 22m cm/d.

But to evacuate R-LNG Petronet-LNG needs a pipeline network or face the prospect that the Gangavaram terminal will end up like Kochi where capacity utilisation is just 2.1% since it was commissioned in August 2013.