OBSTACLES TO A CONDENSATE/LNG STRATEGY

Vol 3, PW 7 (28 Apr 99) Midstream & Downstream
     

Three main hurdles have emerged to the successful implementaiotn of a condensate supply strategy in southern India:- POOR FINANCIAL HEALTH:- On paper, a condensate supply project to Andhra Pradesh looks emminently feasible.

However, the poor financial health of AP Transco, the supply arm of the Andhra Pradesh State Electricity Board (APSEB), and the Andhra Pradesh government will act as serious impediments to financial closure. Andhra Pradesh is one of the weakest states in India, with one of the highest subsidy levels in the country.

Financing of an LNG project is not advisable without a form of Federal Counter Guarantee. GAS FROM BANGLADESH:-Unocal, Shell and Enron are at the forefront of efforts to bring in piped gas to India from Bangladesh.

The World Bank and the US Government are actively lobbying both the Indian and the Bangladesh Governments to get a pipeline project going. If successful, this could seriously upset the financials of any LNG project, as piped gas from Bangladesh will be far cheaper than imported LNG.

RISING DOMESTIC PRODUCTION: A third and equally serious consideration is the very real possibility of major gas discoveries through upstream exploration in the Krishna Godavari basin of southern India, where gas production today is around 4m cm/d, but increasing at the rate of 50% per annum. The Ravva Consortium in the Krishna Godavari has already announced it has a surplus of about 600,000 cubic metres a day and is looking for a buyer.

ONGC is confident that further exploration in offshore and onshore Andhra will yield new gas discoveries.Timing, as ever, is key to the success of any condensate strategy.

Early project implementation will tie down Indian IPPs to an LNG project, forcing surplus gas from new discoveries or from Bangladesh, to look for another home.