Uncertainty hangs over future of Kochi LNG terminal

Vol 6, PW 13 (28 Aug 02) Midstream & Downstream

CONTRAST PROGRESS AT Dahej with negligible activity at Kochi in Kerala, site of Petronet-LNG's second terminal with a capacity of 2.5m t/y.

At Dahej, Petronet-LNG took a huge risk by beginning construction before securing the market. At Kochi, it plans the reverse.

"We will first secure the market," reveals a source. "Only then will construction begin.

All the pre-project activities are complete, most of the clearances are in hand." Does Petronet LNG have marketing problems "No. The south Indian market is big." Yet even Petronet-LNG agrees that its Kochi terminal suffered a setback when NTPC floated a tender to buy LNG for expansion of its Kayamkulam power station rather than work a 'negotiated deal' with Petronet-LNG.

"Kayamkulam would have been a big customer for us." Nonetheless, Petronet-LNG continues to talk to other likely customers in the region: Kerala state government, BSES power station in Kochi, fertiliser factory FACT as well as factories and textile processors in neighbouring Karnataka and Tamil Nadu. Will Petronet-LNG abandon Kochi "We remain committed to the project, even though it is delayed." One fall-out of the delay is that Petronet LNG could not meet the 30th June LNG purchase commitment deadline in the Sales Purchase Agreement with RasGas.

This is not a major issue. "RasGas has accepted there will be a delay in us meeting this deadline.

They know that the market has to be secured first before any commitment is given." Kochi was originally scheduled to receive first LNG in June 2004.