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Awasthi panel moots mega LNG and pipeline project in Orissa

The core group headed by IFFCO managing director U S Awasthi has recommended going in for a major liquefied natural gas project and pipeline delivery network, at a total cost of Rs 218.32 billion, near Paradeep in Orissa to take care of the future feedstock needs of fertiliser plants, power projects and household fuel supply.

The project is envisaged as an integrated chain, consisting of LNG liquification plants located overseas in supplier countries, special tankers for gas shipping into India, receiving port terminals, regasification facilities and a pipeline network for delivering the gas to the consumers. The report of the core group was formally handed over to fertilisers and chemcials minister Surjit Singh Barnala last fortnight.

Natural gas, accounting for more than 70 per cent of the world production of urea, is the preferred feedstock for production of fertilisers in India and elsewhere. The natural gas is liquefied for convenience of transport and is an extensively traded commodity in international trade. It is considered to be the ideal energy source for meeting India's current and future energy needs, including power generation.

The department of fertilisers set up the core group to suggest a national strategy on LNG use. Dr Manu Sethi of the Tata Chemcials Limited is its co-chairman. The chief executives of most of the major fertiliser plants in the public and private sectors are in the group along with representatives from allied sectors.

The strategy suggested by the core group is designed to ensure greater bankability, reduced cost and uninterrupted long-term availability of LNG.

The study has identified Kishoreprasad, adjoining the fishing port of Dhamra on the east coast, north of Paradeep port, as the most preferred location for regasification terminal and pipeline delivery hub for the fertiliser plants, power units and domestic gas supply.

The import of LNG on a long-term supply contract along with liquification, port storage and shipping facilities are envisaged in Qatar, Abu Dhabi, Australia, Malaysia, Indonesia, Iran, Yemen, Bangladesh and Burma.

The location of the project in the east coast is expected to generate systematic developmental and industrial activity in the north-eastern areas that are traditionally backward.

The implementation of the project is proposed in two phases with a capacity of 3.5 million tonnes per annum in each phase. This is designed to reduce the initial cost, cut risks and generate internal accruals for the second phase. The total cost of the project is estimated at Rs 218.32 billion with phase I and phase II costs being Rs 138.46 billion and Rs 79.86 billion respectively.

The overall project schedule for both the phases is estimated at seven-and-a-half years, including pre-project activities. Assuming a zero date of May 1, 2000 (after completion of pre-project activites), LNG production from the phase I is expected to commence by November 1, 2003.

The group expects to get the gas at $ 3 per million British thermal unit (btu) from the supplier countries because of an anticipated 15 per cent concession in a 20-year supply contract. The group has also suggested to the government to authorise it for carrying out the required pre-project activities with an estimated cost of Rs 250 million.

The possible active participants in the project are listed as: IFFCO, Kribhco, Tata Chemicals, National Fertilisers Limited, Duncans Industries, Indo-Gulf Fertilisers, Gas Authority of India Limited, Shipping Corporation of India, foreign gas companies and state governments.

The project financing is expected to get support from Indian financial institutions and banks for rupee loans. Hedged dollar loans and foreign currency loans are expected to come from foreign participants.

UNI

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