NTPC wants 26% stake in LNG facility

Vol 7, PW 3 (23 Apr 03) Midstream & Downstream

NTPC IS ready to make a significant commitment to its future LNG supplier: not only does it want 3m t/y LNG, it is also ready to take a 26% equity stake in the successful bidder's regassification facility.

This will figure in the 1,000-odd page 'Request for Proposal' that NTPC hopes to issue by the end of this month. According to one source, "this is part of NTPC's attempt to create its own LNG chain." Two companies could offer such a stake: Petronet-LNG and Shell, both favourites for the NTPC contract.

With Petronet-LNG, however, there's a problem: if NTPC takes a 26% stake, it would become a state-owned company with combined PSU equity rising to 70% - violating the premise that Petronet-LNG should not be a PSU. Gaz de France might feel uncomfortable as it agreed to take equity in Petronet-LNG only if it stayed non-PSU.

Same for RasGas, which might take equity later. One solution would be for Petronet-LNG's four promoters IOC, BPCL, ONGC and GAIL to reduce their stakes proportionately to accommodate NTPC so that the government's stake does not cross 50% - something they tried and failed to do before.

An NTPC stake in Shell's Hazira regassification facility is more likely. Shell has no equity partner so far but might change its mind.

"Companies like Reliance, BG, Oman LNG could offer stakes in their regassification facilities but NTPC is unsure if they are technically qualified," reveals a source. "Or if their gas can reach in time to meet demand." NTPC wants gas from 2006-07.

Meanwhile, we learn NTPC will call for three separate sets of bids from each company: one for LNG or natural gas supply; one for setting up regassification facilities; and one for evacuation of gas to its power stations at Kawas, Gandhar, Anta and Auraiya. "We think they will pick and choose the lowest bidder from these three bids and then put them together."