Reliance wins gas tender for Kawas and Gandhar

Vol 8, PW 4 (19 May 04) People & Policy

Suspense over NTPCs tender for 3m t/y LNG or natural gas for its Kawas and Gandhar power plants came to a dramatic conclusion last Friday after two frustrating years.

On the morning of 14th May, Reliance, Petronet-LNG, Petronas, Shell and Total affiliate Yemen-LNG submitted bid documents, as expected. But less than ten hours later, NTPC phoned only Reliance, Petronet-LNG and Petronas to attend the opening of price bids at 9.30pm the same day, effectively disqualifying Shell and Yemen-LNG.

Reliance quoted $3.27 per mmbtu at NTPCs plant gate at net heating value inclusive of 4% central sales tax (9 cents on $2.34) and 48 cents transportation. Petronet-LNG (bidding only for regassification) quoted 71 cents including about 12 cents transportation cost.

Petronas quoted $3.63 as its CIF LNG price at net heating value. Reliance has thus emerged as the lowest bidder and should receive a Letter of Intent before signing a 17-year gas supply contract.

Reliances price is closest to NTPCs publicly declared goal of paying no more than $3 per mmbtu. A source adds Reliances price is equivalent to $2.97 per mmbtu when converted to the gross heating value price.

Shell did not submit Annexure 17 confirming its compliance with NTPCs amended terms. Nor did it submit a fresh price bid and was disqualified.

Yemen LNG submitted a fresh price bid but did not fully comply with NTPCs list of amendments and was also disqualified. The unopened price bid envelopes (Shell and Yemen-LNG) will be returned, we learn.

Only Petronas bid LNG. But its uncompetitive price ruled it out.

LNG suppliers tell us they found it very difficult to comply with NTPCs conditions. You had to balance risk with price, confirms one.

High risk means high price but NTPC wanted suppliers to take high risks and give a low price. Petronas did well to balance the risk and price.

It was a very professional response. Petronas was willing to take the risk but at only at a price.

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