End-July deadline for NTPC's gas tender

Vol 7, PW 7 (18 Jun 03) Midstream & Downstream

COMPANIES WORKING feverishly on NTPC's 3m t/y gas tender for Kawas and Gandhar take note: sometime this week, NTPC is expected to circulate the eagerly-awaited list of amendments to its draft contract.

These amendments will incorporate some of the contentious issues raised by bidders during the heated May pre-bid conference in Delhi. We understand NTPC wants price bids to be submitted four weeks from the date the amendments are circulated.

During these four weeks suppliers can propose more changes and amendments to the draft contract. Contacted by this report, many suppliers remain unhappy at NTPC's "anti-supplier" attitude.

Says one: "Everyone will put in a preliminary bid and seek modifications to NTPC's terms." Each supplier will ask for a minimum 200 modifications to the contract terms, we learn. "NTPC has two choices: either they harmonise most modifications with the contract or they reject most and stick to their contract," says a source.

"If they choose the first the whole process will take around three months. But if they try to arm twist, most suppliers will walk away." If that happens, only one or two suppliers will bid, he adds.

"And these one or two suppliers will bid such a high price that NTPC will be forced to cancel the tender. Then the power ministry will have to step in." Suppliers are unanimous that NTPC will be "brought down to earth" and "taught some hard lessons" about the global gas business.

Contentious issues include: NTPC's demand for a 25-year fixed price; most favoured nation treatment; absence of indexation of LNG price to anything; and the 90-day contract termination clause. "It is impossible to meet any of these terms and submit a bid," adds a supplier.

"These terms exist nowhere in the world. A fixed price is fine as long as crude oil prices remain high.

But when it's low, the buyer will suffer. Even the price of coal is not fixed.

We want (LNG price) indexation linked either to the dollar or to inflation."