Petronas still upbeat about Indian LNG market

Vol 8, PW 9 (28 Jul 04) Midstream & Downstream

Petronas of Malaysia is still bullish about the market for LNG in India, despite its failure to secure the NTPC contract for Kawas and Gandhar, which went to Reliance.

Petronas was the only LNG supplier to submit a valid price bid for Kawas and Gandhar but its landed price of $3.63 per mmbtu was far above the winning $2.97 per mmbtu natural gas price (at gross heating value) from Reliance. Yet losing the Kawas and Gandhar tender by such a wide margin has not disheartened Petronas from looking at other opportunities in India.

It is evaluating NTPCs 2.5m t/y Kayamkulam tender as well as Karnataka Power Corporations 1.6m t/y Bidadi gas tender. Rivals to Petronas make much of the costlier shipping charges to transport LNG from Malaysia to India than from the Middle East.

But an industry source counters: Business is not done only on the basis of difference in freight charges; there are a lot of other factors. Petronas manages to sell LNG to Europe, despite the freight disadvantage over LNG from the Middle East.

Petronas has business strategies for each market it is looking at, reveals a source. And India is one of the markets for Petronas but it wont sell to India at any price.

Petronas is not desperate to sell LNG to India. Meanwhile, Petronas is understood to be carefully evaluating the NTPC Kayamkulam tender terms and the feasibility reports ahead of bidding either from Kochi or Kayamkulam or Krishnapatnam.

If the terms and conditions at Kayamkulam are similar to those at Kawas and Gandhar Petronas may still bid. One issue receiving much attention at Petronas HQ in Kuala Lumpur is NTPCs demand for a 26% stake in the LNG regassification facility.

If this fits into their analysis of the risk/reward ratio then they will accommodate it, we are told. In contrast, the Bidadi tender, is more straightforward.

Adds our gas industry source: Theres a problem in India. People here should realise you cannot compare LNG with (domestic) natural gas.

LNG Summit