Mani tells Karnataka to wait for LNG at Mangalore

Vol 9, PW 8 (28 Jul 05) Midstream & Downstream

Mani Shankar Aiyar must be one of the few people to believe that ONGC and Hindustan Petroleum are serious about building a LNG import facility at Mangalore.

Why else would he advise Karnataka to plan future gas supplies on the completion schedule of this proposed LNG import terminal Last month, Aiyar wrote to Karnataka chief minister Dharam Singh telling him that ONGC-owned Mangalore Refineries in alliance with its parent ONGC and Mumbai-based refiner Hindustan Petroleum are planning a LNG facility at Mangalore and that this would be completed by 2011. Aiyar was responding to a letter in which Singh asks Prime Minister Manmohan Singh to direct either ONGC or Indian Oil to set up a LNG facility to feed the 1400-MW Bidadi power plant proposed by the Karnataka Power Corporation.

Writes Aiyar: You might like to advise the concerned entities of the state government (read: Karnataka Power Corporation) to get in touch with ONGC and project their requirements along with proposed commercial terms and conditions. Aiyar pointedly reminds Singh of a missed opportunity last year when the Karnataka Power Corporation carried out a botched LNG tender for the proposed 1400-MW power plant at Bidadi.

In March 2004, two consortia of Indian Oil and Petronas, and ONGC, Bharat Petroleum and Petronet-LNG submitted bids for the project. But the whole process ended in fiasco as the two consortia quarrelled with the state government over the project completion schedule, preferred customer status, payment security, take-or-pay quantities, pricing and termination payments.

Warns Aiyar: Since LNG contracts have strict take-or-pay provisions, and as these issues were not resolved, the consortia did not pursue the proposal. His message is clear: Karnataka needs to learn from its mistakes before calling on LNG suppliers again.