Kakinada promoters wait for Reliance's next move

Vol 6, PW 23 (29 Jan 03) Midstream & Downstream

FURTHER SOUTH in Andhra Pradesh promoters of a 2.5m t/y LNG terminal at Kakinada have taken another key step to move their project forward.

On 8th January Indian Oil, BP, Petronas and Kakinada Sea Ports signed a long awaited Joint Collaboration Agreement in Delhi, followed by the formation of a Project Development Team that includes a representative from each company and whose job it is to see the project through to completion. K.

Govindarajan, a General Manager at Indian Oil, is heading the team. Priority number one is to identify a market for LNG.

"We need to identify the type of power project that can use LNG as fuel," reveals a source in Hyderabad. "We have begun talks with NTPC for this." Alongside the LNG terminal, promoters envisage a 1,000-MW power project that will use 1m t/y LNG as fuel.

"We want NTPC to come into the project with or without equity," he adds. "They have not replied yet.

They say the key issue is price." Kakinada promoters do not consider Reliance a threat. Yet they acknowledge that work on the Kakinada terminal must await "authentication" of the Reliance gas discovery figures and a positive answer from NTPC.

"There is talk in the market that Reliance gas will not last beyond 10 years," he adds. "We can assure uninterrupted supply.

There is no shortage of consumers. The issue is price." Power and fertiliser consumers in Andhra Pradesh are telling Kakinada promoters they want to buy gas at $3 per mmbtu.

"Smaller customers in other sectors can afford to pay a little more because they will get an assured supply from us." Several potential customers have already submitted 'Expressions of Interest' for Kakinada gas.