NTPC insists on 26% stake in regassification terminal

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

One serious disagreement is unlikely to go away.

This is over NTPCs insistence on a 26% stake in the regassification facility. NTPC had insisted on this condition for the Kawas and Gandhar tender but dropped it following objections from regassifiers.

Dont expect this to happen at Kayamkulam. NTPC is firm that it wants 26% equity in the regassification facility.

The regassification terminal to come up for Kayamkulam will be a greenfield project unlike Dahej or Hazira, says our power ministry source. We want NTPC to take an equity stake in it.

Regassifiers are unwilling to oblige. This is not possible, says one bidder.

Theres no justification for this. Why do they need 26% stake We are told that a good, well structured contract can take care of NTPCs concerns over this issue.

Is there a middle path Not at all, says another bidder, if NTPC persists on wanting 26% stake well not bid at all. If this happens, the Kayamkulam tender could go the way of the Kawas and Gandhar tender where, out of the eight bidders in the race for the regassification contract, only Petronet-LNG submitted a valid price bid.

Clearly, the shadow of Kawas and Gandhar looms large over LNG suppliers in the race for Kayamkulam. At Kawas and Gandhar, out of the 18 LNG suppliers initially in the race, NTPC eventually received a valid price bid only from Petronas, which lost out to a sharply lower natural gas price of $2.97 per mmbtu at gross heating value from Reliance.

All indications point to a repeat of this at Kayamkulam. In fact, PETROWATCH is told that LNG suppliers might not submit valid bids at all, leaving Reliance to win by default.

It is not possible for any LNG supplier to offer the price Reliance offered at Kawas and Gandhar. We may not bid at all.

Why should anybody offer this price to India when the US market is giving a much better (around $5.5 per mmbtu) price