Naأ¯ve NTPC wants fairy tale prices for LNG

Vol 6, PW 5 (08 May 02) Midstream & Downstream

SOME IN INDIA are clearly living on another planet when it comes to assumptions of future gas prices! Among them is the country's largest state-owned power utility National Thermal Power Corporation.

We learn for example that NTPC chairman C.P Jain wants to buy imported LNG at the government-controlled landfall domestic gas price of about $1.8 per mmbtu.

He also wants a fixed LNG price for up to 25 years! Can it be possible that NTPC still does not understand that domestic gas prices will rise when import parity with fuel oil is reality Clearly yes. "LNG is generally linked to crude oil prices the world over," reveals an industry insider.

"NTPC is unrealistic in expecting a fixed price for 20 or 25 years. A potential supplier will take a view for 20 or 25 years and then decide the price and ultimately NTPC will not get a good bargain." Eight companies that sent in 'Expressions of Interest' to sell 5m t/y LNG to NTPC are gearing up to make presentations.

No dates have been announced and this has left everybody wondering why NTPC is so slow. An industry analyst tells us only three of the eight companies have a realistic chance of winning the NTPC order: Petronet-LNG, Petronas or Shell.

And the rest "Yemen LNG has not much activity going on. BP Amoco is a strong company but has to start from scratch and tie up customers for an additional 2m t/y LNG to make the project viable.

Reliance is not a serious contender; it has to tie up the entire chain despite its plans for a terminal at Jamnagar. TotalFinaElf is not a serious threat and Abudhabi Gas only has a marginal quantity of gas to spare."