Date:15/05/2004 URL: http://www.thehindubusinessline.com/2004/05/15/stories/2004051500860400.htm

Back Shell pulls out of NTPC's LNG supply tender

Our Bureau

New Delhi , May 14

GLOBAL LNG major Shell has pulled out of the race to supply gas for National Thermal Power Corporation's (NTPC) proposed 1300 MW-each power stations at Kawas and Gandhar in Gujarat.

In the two-stage bid process, the bidders were on Friday supposed to submit their final price bid for supply of gas/liquefied natural gas (LNG). At close of day, NTPC obtained four bids for supply of three million tonnes of gas — Reliance Industries Ltd (RIL), Petronas, Yemen-Totalfina LNG and Petronet LNG Ltd (PLL).

While RIL has bid for supply of gas from its gas fields in the Krishna Godavari basin to the power plant, the other bidders have opted to supply gas for a part of the supply chain. Petronas and Yemen Totalfina have opted to supply LNG up to the port only (cost, insurance, freight - c.i.f price) while Petronet has offered only its regassification terminal. Earlier, Shell had bid for the entire supply chain, from the gas fields to the power plant through the LNG route, proposing to use their Hazira plant to regassify the LNG.

Today, companies were scheduled to submit their final bids following a scheduled review of bid conditions by NTPC. Shell officials informally indicated to NTPC that the decision to pull out had to do with the management's decision to go slow on bid submissions following recent problems faced on account of overestimation of oil and gas reserves by the global gas major.

With Shell exiting the bid fray, NTPC is left with three supply possibilities - Reliance supply from the gas fields to the power plant, Petronas' offer to supply LNG in conjunction with PLL's offer to deliver regassified LNG and Yemen-Totalfina LNG's offer to supply LNG in conjunction with PLL's offer to deliver regassified LNG.

Following today's bid submission, NTPC will be scrutinising the bids to ensure conformity with the bid conditions and finally the price bids will be opened on May 21.

NTPC has opted for a two-part two-stage bid for procuring LNG. Bidders could bid either for supply of LNG, regassification of LNG or both components. The two-part structure of the bid process gives NTPC the flexibility to choose the cheapest LNG supplier and the least cost regassifier, which together will deliver gas supply at the power station end at the least price. At the same time, the domestic gas option has also been kept, for which Reliance has submitted a bid.

In the first stage of the process that began middle of last year, bidders submitted price bids alongside their technical bids.

The technical bids were studied and deviations noted. Following this, some of the bid conditions were modified to elicit optimum quality competition (for instance, NTPC decided against taking an equity stake in the regassification business).

Acting upon this, the bidders today submitted supplementary price bids, increasing or decreasing the prices in their original bid.