Essar follows Torrent with tax-free LNG imports

Vol 20, PW 4 (03 Nov 16) Midstream & Downstream

Essar is the latest to emulate Torrent Power by importing LNG for power generation and saving 20% in state and central government taxes.

Essar took delivery of a LNG 'parcel' cargo delivered to the Shell-operated Hazira terminal on October 24 - part of a 160,136 cubic metres consignment bought jointly with GSPC, Gujarat State Energy Generation (GSEG) and GSPC Pipavav Power Company (GPPC) at $5.60/mmbtu delivered. Booked by Essar Steel, the LNG is destined for Essar Power's 500-MW power station at Bhander in Hazira, revived after a three-year shut-down for a $200m coal conversion aborted when LNG prices crashed.

"Fuel for the power plant is sourced by Essar Steel," confirms Essar. "Our Bhander station is captive to the steel plant." With combined consumption of 7.5m cm/d for the steel and power plants, Essar is coy about future plans.

"This is our first LNG import cargo," confirms Essar. "We will evaluate future LNG imports based on pricing before deciding." Others have no doubt.

"Essar's appetite for LNG is huge!" says an analyst, "It can easily be a stand-alone consumer of LNG. With tolling agreements in India you can get a much better price than buying from 'aggregators' (Petronet-LNG, IndianOil, GAIL)." Sourced by SITME from Trinidad & Tobago, Essar's first 'parcel' cargo will benefit from a 5% customs duty and 15% VAT waiver.

This luxury is not available to 'aggregators' who pass on the tax to end-users.