Petronet LNG expects 50 per cent cost escalation

Petronet LNG is expecting a 50 per cent cost escalation of its Kochi project as it gets ready to sign the LNG supply contract with Gorgon project in Australia. The need for a deeper pile work because of unstable soil and rising price of nickel to be used inside the storage tanks will push up the project cost by Rs 1000 crore to Rs 3000 crore, Petronet CEO and MD P.Dasgupta told reporters here.

After concluding all commercial negotiations, Petronet is discussing the draft sales purchase agreement for supply of 2.5 million tones of LNG from Gorgon for 25 years. ``We will have to conclude it by June 30,?? Mr Dasgupta said.

Though he didn?t reveal the final price, Mr Dasgupta said as per the price averaging system approved by the Centre, Petronet will be able to deliver LNG at $5.75 per mmbtu to all its consumers in the country. The price has been arrived at after factoring in the possibility of availability of gas from Krishna-Godavari belt in the southern states.

With uniform price the existing consumers of its Dahej project will have to share the price burden of supply of LNG from new sources under this system

Petronet is expecting to start construction by mid-year after awarding the engineering, procurement and construction (EPC) contract and shipping contract by March 31. The Gorgon gas will be available from 2011 while the Kochi project is expected to be completed by July 2010. Petronet will buy LNG from other sources to fill the temporary gap, according to Mr Dasgupta.

Meanwhile, the company is in advanced stage of negotiations with Qatar for participation in $ 100 million foreign currency convertible bond to raise money for its projects.

Source: The Economic Times, Kochi, January 30, 2007
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