Gearing up for first R-LNG from Kochi terminal

Vol 14, PW 17 (24 Feb 11) Midstream & Downstream

Excitement is mounting with only a year to go before Petronet-LNG commissions its Kochi LNG terminal in Kerala.

PETROWATCH learns GAIL signed its first Gas Transportation Agreement (GTA) for R-LNG from Kochi this month with Mangalore Chemicals & Fertilisers (MCF), owned by Kingfisher beer and airline baron Vijay Mallya. GAIL will transport 750,000 cm/d of R-LNG from the Kochi terminal to the MCF factory at Panambur in Karnataka and MCF will use this gas to replace naphtha as raw material in the production of urea fertiliser.

GAIL signed the 15-year GTA with MCF based on an ‘indicative tariff’ of $1/mmbtu, a figure derived from the Detailed Feasibility Report for the 24-inch diameter pipeline it is laying to evacuate R-LNG from the Kochi terminal to Mangalore. But the ‘final tariff’ will be fixed only after this pipeline is completed.

“We’ll submit the indicative tariff to the PNGRB (Petroleum & Natural Gas Regulatory Board),” explains a GAIL source. “They will decide the final tariff based on the completed project cost of the (Kochi to Mangalore) pipeline.

” MCF’s factory at Panambur is approximately 390-km from Kochi, he adds, and is expected to begin receiving Kochi R-LNG from GAIL in 2014. Panambur is also just 9-km north of Mangalore city and right next to the New Mangalore Port.

“You could say MCF is the first customer to sign all the documentation for Kochi R-LNG,” we learn. But our source clarifies that GAIL will only transport this R-LNG and MCF’s supplies will come from GAIL’s fellow Kochi promoter and wholesaler IndianOil in line with a Gas Sale Agreement signed in 2009.

IOC will supply Gorgon R-LNG to MCF at a price linked to a 14.5% slope of the Japanese Customs-cleared benchmark.