Banerjee confident first LNG to Dabhol by July 2006

Vol 9, PW 15 (03 Nov 05) Midstream & Downstream

GAIL chairman Proshanto Banerjee is confident that first supplies of LNG will reach the stricken Dabhol power plant by the middle of next year.

Banerjee tells this report he believes cargoes delivering the first batch of 2.1m t/y required for the power plant will begin reaching Dabhol between July and September 2006, and the balance 2.9m t/y by the beginning of July 2007. 2.1m t/y must reach Dabhol between July and September next year, Banerjee tells us.

This is our commitment to lenders. 2.1m t/y is a small amount.

It shouldnt be difficult to procure. GAIL believes it can easily sell the balance 2.9m t/y to fertiliser, steel and power customers in Maharashtra and is planning a 150-km pipeline from Dabhol to Panvel in the industrial heartland of Maharashtra.

Factories in this region are not even getting 50% of their gas requirement, adds Banerjee. Its pathetic to read these letters begging for supplies of such small quantities.

In July this year, GAIL and NTPC set up the Ratnagiri Gas and Power Company on a government instruction to re-start the Dabhol power plant and 5m-t/y LNG terminal. NTPC is charged with re-starting the power plant and GAIL is charged with securing LNG.

Confidentiality Agreements are in force with suppliers in Australia, Malaysia, Abu Dhabi, Oman and Qatar. No agreement is yet in sight but talks continue.

Price and availability are the two biggest constraints, adds Banerjee. We are ready to pay a mutually agreed price.

Banerjee dismisses criticism (See story 19 below) that GAILs failure to secure LNG is down to its unwillingness to pay market rates. We are not seeking charity, retorts Banerjee.

LNG prices will not remain at these high levels. They know this and we know this.

Variable LNG prices can be factored into a five to ten year contract. Banerjee pins his hopes in the widely held view among LNG buyers that prices will soften over the long term when additional LNG from new trains in Sakhalin, Indonesia, Iran, Yemen and Australia begin flooding the market after 2009.