Vol 3, PW 16 (01 Sep 99) Midstream & Downstream

Escrow cover aside, the biggest threat to any future LNG project in Andhra Pradesh is the prospect of a massive hike in domestic gas production from the nearby Krishna Godavari (KG) basin.

Nowhere is this more starkly illustrated than by the fact that the maximum number of bids were made for Krishna Godavari acreage under NELP: a total of 19. Also, business development sources at the Gas Authority of India (GAIL) tell this report confidently that existing production will rise from the current level of 3.5m cubic metres a day (cm/d) to 9m cm/d by 2002, and 12m cm/d by 2004.

"These figures do not include the likelihood of any future discoveries", a source tells Petrowatch, "We are already making preparations to expand our pipelines to cater for future discoveries". He adds: "There will be no bottlenecks.

If more gas is discovered we will be able to move it through our system". Present estimates of recoverable gas reserves in the Krishna Godavari suggest supplies will last for a minimum period of 15 years, if not more.

Such confident talk will only discourage companies with plans to import LNG into Andhra Pradesh. Demand for gas in Andhra Pradesh is high and rising, but negligible compared to other industrialised states such as Gujarat or Maharashtra.

Present offtake by local industries and power plants is between 1.5 and 1.8m tonnes a year (t/y) of domestic gas, all produced by ONGC. Though future demand projections are difficult to establish, it does not take a genius to work out that with domestic gas production slated to rise to 12m cm/d (approximately equivalent to one LNG terminal of 2.5m t/y) there is only room for a maximum of one LNG project in Andhra Pradesh - not five as listed above.