IFFCO and KRIBHCO due diligence of Dahej

Vol 6, PW 18 (06 Nov 02) Midstream & Downstream

MERCIFULLY IFFCO and KRIBHCO are not listening to the likes of S.

S Palanimanickam. On 24th and 25th October IFFCO and KRIBHCO teams were visiting Petronet-LNG in Delhi.

"This was the start of the due diligence," reveals a source. "The teams will now report back to their respective management." This is not the first time IFFCO and KRIBHCO have approached Petronet-LNG.

Talks broke down last year over a key demand that in exchange for an equity stake, the fertiliser companies could receive regassified LNG at cost, minus the marketing margin. Dahej offtakers Indian Oil, GAIL and Bharat Petroleum refused.

In the intervening period, IFFCO and KRIBHCO approached Shell for equity in Hazira but according to a Petronet-LNG source, the talks with Shell went nowhere. "They realised we can supply LNG before Hazira.

Both of them want LNG fast. Their expansion plans are held up because they have no gas." Petronet-LNG is offering IFFCO and KRIBHCO a maximum 10% stake each.

Unlike NTPC, which abandoned efforts to acquire equity in Petronet-LNG because of the associated risk, we understand IFFCO and KRIBHCO are happy to assume the associated risk of a 25-year SPA with RasGas. A bonus will be direct supply from Petronet-LNG.

"They will be able to get gas minus the marketing margin that GAIL, BPCL and IOC charge." IFFCO and KRIBHCO want at least 1m t/y of LNG, equivalent to 20% of Petronet-LNG's annual supply at Dahej.