Ship gas for free in future H-Energy pipeline

Vol 19, PW 18 (19 May 16) Midstream & Downstream

Surprise and bewilderment have greeted a decision by H-Energy to quote an almost zero transmission tariff to win a 750-km gas pipeline project from Contai in West Bengal to Dattapulia near Kolkata.

A subsidiary of Mumbai-based property developer Hiranandani, H-Energy proposed this pipeline to evacuate R-LNG from its planned 4m t/y FSRU off Haldia in West Bengal and Adani Energy's upcoming 5m t/y LNG terminal at Dhamra in Orissa. When the PNGRB opened bids on May 12, H-Energy's unusual tariff of Rs0.09/mmbtu for the 300-km Zone 1 for 25 years set eyes rolling.

Next came IndianOil with Rs92.93/mmbtu ($0.40), followed by Adani Energy with Rs107.02/mmbtu ($1.60) and Ratnamani Metals & Tubes with Rs907.86/mmbtu ($13.60). For the 300-km Zone 2, H-Energy, IOC and Adani each quoted a 1% increase over Zone 1 for 25 years but Ratnamani quoted a 99% increase.

For Zone 3 all bidders quoted a 1% increase for 25 years over their Zone 2 tariffs. Analysts say this is the first time in India a gas transmission pipeline is being proposed with a near zero transmission tariff.

Under PNGRB rules, 33% capacity must be reserved for common carrier use. But given H-Energy's low bid, there are doubts the project will materialise.

As H-Energy is lowest bidder however the PNGRB has no choice but to issue it the LoA. "Anybody can push gas through this pipeline for free," says a source.

"That's what H-Energy's bid means."