Petronet-LNG splits Kochi terminal contract into three
Petronet-LNG has decided to split into three parts the EPC contract for its proposed 2.5m t/y LNG import and regassification terminal at Kochi in Kerala.
“Instead of one there will now be three EPC contracts,†a senior Petronet-LNG source tells us. “Our board has decided this is the best way forward.
†Till now Petronet-LNG was in discussions with the IHI-led consortium for a consolidated EPC contract but talks hit deadlock over the price quoted by IHI for the terminal shore facilities. Project management consultant Engineers India had prepared a single bid package for the Kochi LNG terminal but is now under instructions from Petronet-LNG to split the project into three.
There will be one EPC contract for the two onshore LNG storage tanks; one contract for the shore facilities such as pipelines, high-pressure pumps and pipelines, vaporising plant, control rooms; and one contract for the marine facilities. Petronet-LNG’s logic for splitting the single EPC contract into three is simple: “The moment you consolidate such a large and complex contract you eliminate many bidders who specialise in executing various parts of the project but who may not be comfortable working in a consortium with other bidders or with the (consortium) leader.
†Splitting the contract brings in more competition. “This is what IOC and ONGC are also doing now for large, complex contracts,†we are told.
Breaking up the single EPC contract into several smaller contracts also lowers costs. “Within a consortium, the companies carry out their part of the project but bill the consortium leader who then bills Petronet-LNG after adding their margins.
†When the contract is split, “companies responsible for each part directly bill Petronet-LNG and you eliminate the margins of the consortium leader.†These margins may be small change for the company that leads the consortium, but for Petronet-LNG they add up to savings in the total project cost.
With the experience of constructing and doubling capacity at Dahej, Petronet-LNG is more confident than before of directly overseeing construction of the proposed Kochi LNG terminal.