GMR moves ahead with LNG terminal plans

Vol 20, PW 3 (20 Oct 16) Midstream & Downstream

Bengaluru-based GMR Group says it is serious about plans to set up a LNG terminal at Kakinada in Andhra Pradesh despite widespread misgivings about the project's viability.

NSE-listed GMR is expecting a DFR from L&T on the proposed LNG project following a pre-feasibility report which L&T has already delivered. "There are no timelines (for the report)," says a GMR source.

"All I can say is the report will be ready soon." GMR did not disclose how much it is paying L&T but sources speculate the cost for such a report is likely to be anything from Rs2cr ($299,365) to Rs5cr ($748,413). GMR's willingness to spend this amount would indicate it is thinking hard about the project.

But when asked about its plans to source LNG our GMR source admits it hasn't given the subject much thought. "Discoms (power distribution companies) will buy all the power generated using R-LNG from the terminal," he says.

"We'll sign medium or short term LNG contracts." GMR wants to build the 1.75m t/y regasification terminal to feed its three gas-based power stations stranded since 2013: the 388-MW Vemagiri station at Rajahmundry; another 768-MW station adjacent to Vemagiri; and a 220-MW barge-mounted station at Kakinada, which the company wants to sell. Sceptics argue that even with global LNG prices trading as low as $5/mmbtu to $6.5/mmbtu power distribution companies will hesitate to sign long-term Power Purchase Agreements with a R-LNG-based project.