Expensive Gorgon LNG deters Kochi users

Vol 14, PW 18 (10 Mar 11) Midstream & Downstream

Everything looked fine last month when GAIL signed its first Gas Transportation Agreement for R-LNG from Kochi with Vijay Mallya-owned Mangalore Chemicals and Fertilisers.

But that isn’t the case anymore. Petronet-LNG’s Kochi LNG terminal is scheduled to be commissioned in March next year and GAIL is doing its best to line up R-LNG customers.

But a senior GAIL source complains of delays from several potential customers. Take state-owned Fertilisers and Chemicals Travancore (FACT), which GAIL hopes will take 1m cm/d of R-LNG from Kochi, but now seems to be ‘shying away’ from the high price of Gorgon LNG, Kochi’s only long-term source of LNG supplies.

FACT directors approved the Kochi R-LNG formula proposed by GAIL, but the file still awaits approval from FACT’s parent and promoter - the fertiliser ministry in Delhi. GAIL finds it strange that the fertiliser ministry representative on the FACT board, who approved the R-LNG price earlier, is now opposing the same proposal in the fertiliser ministry! GAIL offered to supply cheaper LNG sourced from Japan’s Marubeni during 2013 to allay fertiliser ministry concerns over the high Gorgon LNG price, linked to a 14.5% slope of the Japanese Customs-cleared Crude (JCC) basket.

“FACT accepted our proposal to supply (cheaper) Marubeni gas for one year,” says GAIL. “But it still argues it is cheaper to import fertilisers than to produce them using Gorgon LNG.

” GAIL is also worrying about the fate of its 15-year GSPA and GTA with the Anil Ambani-owned BSES power station in Kochi, which it hopes could take 900,000 cm/d of R-LNG. Both documents await approval by the Kerala State Electricity Board (KSEB) which is the power station’s sole customer.

“Any fuel related matter has to be approved by KSEB,” explains GAIL, “because the BSES Power Purchase Agreement with KSEB expires in 2015.”