GAIL talks to Birlas to revive Ennore LNG project

Vol 8, PW 8 (14 Jul 04) Midstream & Downstream

GAIL is talking to the Aditya Birla group to revive a dead proposal to construct a LNG import terminal at Ennore in Tamil Nadu.

Ennore was in the news more than four years ago when the Tamil Nadu Industrial Development Corporation selected the Birla-led consortium of Unocal, CMS Energy, Woodside Petroleum and Siemens to set up a 2.5m t/y LNG import terminal and 1,830-MW captive power station. Later named the Dakshin Bharat Energy Consortium, the project faded into insignificance but has now been given a fresh lease of life by GAIL.

Talks with the Birlas began about seven months ago, reveals a GAIL source. Their response is positive.

Under discussion is a joint venture proposal to revive the project with GAIL holding a majority stake and management control. GAIL hopes to close talks in another three or four months after which it will begin work to set up the terminal.

Under the earlier proposal, Dakshin offered to generate electricity at an attractive levelised tariff of Rs2.97 per KwH - made possible only because RasGas had agreed to sell LNG at a price linked to a ceiling Japanese Crude Cocktail price marginally above $20 per barrel at a time when oil prices were at an all time low. Tamil Nadu State Electricity Board was the sole designated buyer of electricity generated by Ennore.

But difficulties emerged over the payment security mechanism as TNSEB could only guarantee payment for 750-MW for which it offered to set up an escrow account. Dakshin agreed on condition that it could raise the power station generating capacity to 2,000-MW and export the balance 1,250-MW to neighbouring states.

No agreement was reached and the project faded away. Unocal and CMS moved out but Woodside Petroleum and Siemens are still understood to be in the consortium.