Christmas means NTPC deal will happen next year

Vol 7, PW 19 (03 Dec 03) Midstream & Downstream

Expect NTPC to sign the natural gas or LNG supply and regassification contract(s) for the Kawas Gandhar tender by the end of January or later, given the pace of negotiations and the complexity of unresolved issues.

In Delhi last month, NTPC chairman CP Jain said the companys deadline was end-December. However, a source close to Reliance tells PETROWATCH that end January seems more realistic with Christmas and the New Year holidays approaching.

Once these discussions are over, NTPC will issue the list of deviations and modifications that they have accepted, he said. Bidders can then submit revised price bids.

But over Christmas nobody will be available in any of the foreign companies. The whole process will spill over into next year and signing of the contract seems possible only towards the end of January.

Meanwhile, we learn Shell and Petronet-LNG disagree with NTPC about the amount of control it will have over the regassification facility. If it chooses LNG over natural gas, NTPC wants a 26% equity stake in the company that runs the regassification facility and is also willing to share the risk.

But it is unwilling to be a sleeping partner and wants a say in day-to-day operations. We told them you spell out the liquidated damages and penalties in case of default by us, adds our source.

Why do you insist on such close monitoring NTPC also wants preference over other contractual customers if supplies are disrupted. Also at issue is NTPCs insistence on most favoured customer treatment on price.

How can we agree to this asks a source at one regassifier. Prices are package deals negotiated from customer to customer.

Another onerous NTPC condition is its insistence on acquiring a 100% stake in the regassification facility if it faces problems.