Price talks begin for Kochi LNG terminal EPC contract

Vol 11, PW 12 (18 Oct 07) Midstream & Downstream

Petronet-LNG began price negotiations last week with the IHI-led consortium for the EPC contract to build a 2.5m t/y LNG import terminal and regassification facility at Puthuvypeen Island off Kochi in Kerala.

PETROWATCH learns IHI’s price bid – submitted on August 17 - was opened by Petronet-LNG on October 8. “As IHI is the sole bidder it was given the option of submitting a fresh price,â€‌ says a source.

“But it declined and wanted its bid opened. IHI does not seem to have felt the need to put in a fresh price.

They have probably built into their price all the additional costs expected on account of poor soil conditions at Kochi.â€‌ Discussions are still continuing between Petronet-LNG and IHI.

Sadly we don’t know the value of IHI’s bid, but we do know Petronet-LNG finds it slightly “higherâ€‌ than its own estimates - based on advice from US consultant Fluor Daniel - and has asked IHI for a justification. “IHI has asked for seven days to come back with its answers,â€‌ reports a Petronet-LNG source.

“It has to work out its estimates and justify its assumptions.â€‌ Petronet-LNG originally wanted to sign the EPC contract by end-September, but is not concerned by the delay.

“For a big contract like this worth several hundred million dollars, a few days delay here or there is immaterial,â€‌ we hear. “What is important is to start with everything in order.

â€‌ Petronet-LNG is separately evaluating offers to choose a Project Management Consultant for Kochi. At Dahej the PMC was Foster Wheeler but for Kochi, UK-based Whessoe Oil & Gas is emerging front-runner.

“Foster Wheeler is not interested, as it has its hands full.â€‌ Petronet-LNG has yet to sign the port concession agreement with Kochi Port Trust.

Here too, Petronet-LNG is unconcerned by the delay. “It (port concession agreement) will happen, it is on the way,â€‌ we are told.

“There’s no cause for worry.â€‌