Explaining the poor response to Kayamkulam tender

Vol 8, PW 14 (06 Oct 04) Midstream & Downstream

Reliances absence from the Kayamkulam tender was the biggest surprise.

As the sole natural gas bidder, Reliance was expected to repeat its Kawas and Gandhar gas price at Kayamkulam and walk away victorious. An overseas LNG supplier suspects Reliance abstained because it did not have enough gas for Kayamkulam.

Maybe they only have enough gas for Kawas and Gandhar and for their own Dadri power station, we are told. Another overseas supplier tells us Reliance took a political decision not to bid.

They quoted a rock-bottom price for Kawas and Gandhar, he said. It would be difficult for anybody to sell gas at this price anywhere.

Another surprise absentee was the consortium of BP, IOC and Petronas, which was expected to bid for LNG supply (Petronas) and regassification (from Krishnapatnam). Its believed the consortium submitted a conditional bid only for regassification because Petronas was unwilling to bid for LNG supply.

However, the bid for regassification was rejected by NTPC because, IOC asked for more time. Petronas declined to bid because it is balancing its LNG demand-availability system.

Petronas is unsure if it has enough LNG for Kayamkulam or anywhere else, we are told. Petronas is taking stock of its global LNG portfolio.

Petronas expects to resolve its supply-demand balance by the end of this year or early 2005. After that theyll return to India and other markets.

Another source describes Yemen LNGs absence from Kayamkulam as, the fall-out of the Kawas and Gandhar tender. Yemen LNG was discouraged by what happened at Kawas and Gandhar, he adds.

There was a huge gap between the $3.63 per mmbtu LNG price of Petronas and the Reliance price of $2.97. This showed that LNG suppliers have no chance in India for now.

Yemen LNGs absence, only confirms it was difficult for any LNG supplier to win this tender.