Volatility in LNG halts IOC plans
New Delhi   25-May-2011

PSU oil major IndianOil (IOC) has said it is keen on executing the proposed LNG (liquefied natural gas) terminal project at Ennore near Chennai. But the volatile and abnormal situation in LNG market is holding it back from quick implementation of the same.

“We are looking for a strategic partner and are in talks with many companies. The LNG prices too were beginning to show some stability. But post-Tsunami in Japan, the prices have gone up. So there is a volatile and abnormal scenario in LNG market and hence the project implementation is slow,” RS Butola, chairman, IndianOil said.

Pricing is considered to be a key factor for sourcing LNG. IOC is scouting for a strategic partner who has the ability to source LNG on its own or through some sources, experience of setting up a LNG project and interest in doing business in India for long term. The project cost for setting up the LNG terminal is estimated at Rs. 4,320 crore.

IOC and Tamil Nadu Industrial Development Corporation (TIDCO) decided to set up a five million tonne a year LNG receiving terminal at Ennore Port and lay pipeline infrastructure for distribution of re-gassified natural gas from the terminal. A gas-based 1,000-mw power plant has also been planned along with the LNG terminal project. The cost for this LNG terminal-cum power project was estimated at about Rs. 10,000 crore.

Though financing was not seen as an issue for the LNG project, which was revived after 10 years, the company has been attempting to rope in a partner who can bring LNG as also establish the power plant.

LNG competes with naphtha, coal, fuel oil and similar hydrocarbons. These fuels are used by various industries such as fertilisers, power and others. In addition, LNG also competes with domestically produced natural gas. LNG offers several advantages over the mentioned alternate fuels.

India has been using RLNG, with two operational terminals at Dahej (owned by Petronet LNG) and Hazira, Gujarat (owned by Shell Hazira LNG).