Two southern states lose interest in Kayamkulam

Vol 13, PW 20 (25 Mar 10) Midstream & Downstream

Doubts are emerging about NTPC’s expansion plans for the 350-MW Kayamkulam power station because two anchor customers have been scared off by the high electricity generation costs.

PETROWATCH learns the southern Indian states of Andhra Pradesh and Tamil Nadu both said in January they no longer want Kayamkulam power. So instead of adding nearly 2100-MW to Kayamkulam’s generating capacity, as originally planned, we hear NTPC will now add only 1050-MW.

Kayamkulam is a combined cycle power project in Kerala and anynew gas turbines would have been fired by R-LNG from the under construction Petronet-LNG promoted 2.5m t/y terminal at Kochi. According to a source at GAIL, which will be supplying R-LNG to Kayamkulam, Andhra Pradesh and Tamil Nadu were originally interested in this Kerala-based project because many of their own power stations were sitting idle for want of gas.

“But all of Andhra Pradesh’s once-idle power stations now receive cheap D6 gas,â€‌ we hear, “so it no longer needs Kayamkulam power.â€‌ Andhra Pradesh was also worried that costly Kochi R-LNG would push up the Kayamkulam electricity price.

Kochi-landed LNG prices would be linked to the Japanese Crude Cocktail (JCC) benchmark, explains GAIL, and if the JCC price is $100/barrel the Kochi LNG price would be $14.50/mmbtu. Contrast this with the $4.2/mmbtu price of landed D6 gas and it’s not hard to see why Andhra Pradesh has lost interest! Similarly, Tamil Nadu hopes D6 gas supplies will revitalise its idle power stations and is pushing Reliance to lay a pipeline connecting Chennai with the Kakinada D6 landfall point in Andhra Pradesh.

Tamil Nadu also has great hopes for gas discoveries likely from companies like ONGC and Reliance exploring the Cauvery basin and is likewise considering the proposed Ennore LNG terminal promoted by IndianOil as another potential fuel source for its power stations. All of which makes Kayamkulam’s high-cost power even less attractive!