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

Industry circles are predicting that the two LNG projects at Dahej and Pipavav have become mutually exclusive and that one will die.

Criticism of the Petronet-LNG backed Dahej proposal centres on its unsuitability as a port with particularly severe maritime conditions (9 metre waves and 6 knot currents), making it unsuitable as 365-day a year port. Critics are highly sceptical of claims that a breakwater will ease weather conditions at Dahej and point to the prohibitive cost of building one.

In addition, this report learns Kvaerner and Tractebel Engineering are unlikely to bid for the EPC contract at Dahej because of doubts over its viability. It is learnt that Bechtel will bid, but (secretly) hopes it will not be selected.

At Pipavav, meanwhile, British Gas, has short listed a total of five contractors. Criticism of the British Gas project, meanwhile, centres not on the port - which is up and running and generally considered world class - but on British Gass (in)ability to secure a firm supply of LNG.

That perception may soon be about to change. On 7th July, British Gas finally signed its MOU with National Thermal Power Corporation (NTPC), allowing the latter a 26% stake in Gujarat Pipavav LNG (GPLNG).

For reasons of "transparency", one of NTPCs principal demands included in the MOU is that British Gas invites tenders for the supply of LNG - something it is expected to do in the weeks ahead. A second demand is that 50% equity in Gujarat Pipavav LNG be held by Indian government-controlled companies, similar to the equity pattern of Petronet-LNG.

C.P Jain, NTPC finance director is reported as saying that NTPC will invest about $42m for its 26% stake in Gujarat Pipavav LNG.

Jain said the total cost of the project is $450m, with an equity base of $160m.