Talks continue between BP/GAIL/Tata for Dabhol

Vol 8, PW 5 (02 Jun 04) Midstream & Downstream

Dabhols poor physical condition is not deterring GAIL, BP and Tata Power from plans to acquire the asset.

We learn the three companies are actively negotiating a Joint Participation Agreement to bid for Dabhol and hope to reach agreement before the government announces any sale. The three-way agreement will determine the structure of the Dabhol bid and how to proceed if it wins.

Talks cover three areas: the responsibility of each company during the bidding process; terms and conditions of participation in a Dabhol bid; and participation in any Dabhol related business in India. On one thing they all agree: the Dabhol power station will use regassified LNG.

BP will supply LNG at competitive rates and be the sole supplier of LNG for other customers who buy LNG from Dabhol. Also under discussion is the sale mechanism for regassified LNG from Dabhol.

GAIL will be under pressure to buy regassified LNG on a take-or-pay or pay basis from BP. Not in dispute is GAILs responsibility for piping Dabhol gas to customers, including the captive requirement of the parties.

Talks also cover possible expansion of the LNG terminal to cater to future soaring gas demand in Mumbai and Maharashtra. On 5th April the three companies signed a Joint Development Agreement, clearly demarcating responsibilities.

We are ready to bid for Dabhol, reveals a senior GAIL source. We are only waiting for word from the lenders.

The lenders are custodians of the project. The ball is in their court.

Under the JDA, Tata Power will lead activities relating to the operation of the power plant, the distribution and sale of power and all other power related matters; BP will lead activities related to the operation of the regassification terminal, LNG supply and management; and GAIL will lead activities relating to the development of the gas pipeline, and transportation of gas.

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