The Hindu : NTPC to go it alone on LNG

Online edition of India's National Newspaper
Saturday, Nov 02, 2002

Southern States

Southern States - Kerala

NTPC to go it alone on LNG

By Our Special Correspondent

THIRUVANANTHAPURAM NOV. 1. The National Thermal Power Corporation (NTPC) has decided not to associate with Petronet's proposed liquified natural gas (LNG) project in Kochi as a customer.

This decision virtually makes this project a non-starter, since, under the existing circumstances, the project will be viable only if it has a big anchor customer like the NTPC to sustain it.

The Union Minister for Power, Anant G. Geete, told presspersons here today that the NTPC would be setting up its own LNG terminal in the State for the fuel needs of its plant at Kayamkulam.

The NTPC would be expanding its power-generation capacity in Kayamkulam by 1,950 MW, he added. The Kayamkulam plant, at present, had a generation capacity of 350 MW.

Sources in the NTPC told The Hindu that the NTPC had backed out of the Kochi LNG project since it was refused sufficient equity participation in the Petronet consortium.

The NTPC fears that if it functions as an anchor customer without sufficient equity participation, it would have no control over the price of LNG.

``We do not want to have our bitter experience with naphtha to be repeated in the case of LNG also. So we have decided to have our own LNG terminal,'' sources said.

When the NTPC started work on the Kayamkulam project, the price of naphtha was ruling at the level of Rs. 6,200 a tonne.

When the generation started, it went up to Rs. 7,000 a tonne and then shot up to Rs. 20,000 a tonne within a matter of six months. The generation cost thus exceeded all limits, making the power generated in Kayamkulam one of the costliest among the NTPC units in the country.

The NTPC's expansion plan in Kayamkulam consists of three new modules of 650 MW each, raising the total generation capacity of the unit by 1,950 MW. Work on the expansion would start only after putting the LNG terminal in place.

Sources said the NTPC had already floated a tender in its efforts to find a good tie-up for the LNG terminal. It has received expressions of interest from 12 companies.

The NTPC, at present, does not have experience of its own in setting up LNG projects.

The NTPC is working on two options for this project. One is to have the LNG terminal in Kochi, where there is a good harbour, and bring the LNG by pipe to Kayamkulam, 100 km away. The other choice is to establish the terminal in Kayamkulam itself. This will necessitate the setting up of a new port off the Kayamkulam coast.

The options have been examined separately and the feasibility reports are ready. Kerala would be eligible for a share of the power generated from the proposed modules as per the Gadgil formula. The new modules will not be "totally dedicated" to Kerala, as is the case with the existing generation capacity.

Sources said it was unlikely that the expansion would materialise during the 10th Plan period.

"If everything progresses according to plan, it will take five years to establish the LNG terminal. At the latest, the proposed modules would start generating power by 2007," the sources said.

The proposed Petronet LNG project, which is vanishing from the scene because of the NTPC's decision to have its own facility, was to have a capacity of 2.5 million tonnes, capable of feeding a host of industrial customers in the State.

The prospects of several private sector power projects, including the proposed the 613-MW Kannur Power Project of K.P.P. Nambiar and Associates, have become bleak on account of this.

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