Open bidding likely for India's Dabhol LNG terminal sale:Petronet

Any sale of Ratnagiri Gas and Power's LNG import terminal, previously known as the Dabhol project, in India's western state of Maharashtra would
have to be done through an open bidding process, especially because it is state property and there would be a few interested buyers, a senior official
at Petronet LNG said Friday.

Indian press reports earlier this week cited Cabinet Secretary B. K. Chaturvedi as saying at a project review meeting that the government was
considering hiving off the terminal to Petronet. But the company had not been approached on the matter, the Petronet official said.  
While it seemed logical to parcel out the terminal to Petronet, India's maiden and largest LNG importer, there would be other contenders, especially state-run gas transmission utility GAIL, he said.

The gas supply issue faced by the current proponent of the project would make Petronet, an established player with 5 million mt/year of current term imports from Qatar's RasGas, a natural choice, but Petronet would need to do "multi-dimensional due diligence" before putting in a bid, the official said.

The terminal is meant to serve the 2,184-MW Dabhol power plant, which is planned to switch to natural gas once the import terminal is completed and term LNG supplies are secured. However, GAIL, which was mandated by the Indian government to complete the LNG terminal and secure gas supplies, has been facing an uphill battle in tying up imports at its target price. GAIL has held talks with LNG suppliers in Oman, Qatar, Australia and Abu Dhabi but its target procurement cost of $3.65/MMBtu lagged far behind soaring global LNG prices.

Petronet would have to put an "as-is-where-is" value on the terminal, and need access to the project's books, the official said. LNG was available, but for a price, and this factor would have to be part of the due diligence as well, he added.

Despite the uncertain economics, the terminal was an attractive asset, owing to its access to consumers in Maharashtra state other than the Dabhol power plant, the Petronet official said. A 184-km pipeline is being laid from the terminal to Panvel in Maharashtra. Another pipeline is being laid from Petronet's Dahej LNG import terminal in the neighboring state of Gujarat to Dabhol, so that gas from Dahej might be supplied to the Dabhol power plant. The connection between the two terminals would also give Ratnagiri access to Uran in Maharashtra, via a Dahej-Uran pipeline expected to be commissioned next year, the Petronet official said. Ratnagiri Gas and Power enjoys an exemption from customs duty on LNG and naphtha imports, granted by the central government to make its power from the Dabhol plant competitive.

RGP is a partnership comprising state-run gas transmission utility GAIL and power giant National Thermal Power Corp. The joint venture last year took over the former Enron-led Dabhol plant mothballed in mid-2001 over a dispute with its sole buyer, the Maharashtra State Electricity Board.
RGP had last year estimated a cost of Rupees 7.10 billion ($152.4 million) for completing the remaining 15% of the work on the 2.5-million
mt/year Dabhol LNG import and regasification terminal.

It now turned out the terminal needed an additional Rupees 10 billion, India's PTI news agency quoted an unnamed senior power ministry official as saying Thursday. Together with the transfer cost of Rupees 17.9 billion, the total cost of the LNG unit would come to about Rupees 35 billion, an expense equivalent to building a new 7.5 million mt/year terminal, the Petronet official said. Also, the expected completion date had been delayed from 2007 to 2009, he added.

The transfer cost refers to the amount RGP paid for the asset to the Indian lenders of what was the formerly Enron-led Dabhol Power Co. RGP brought back into operation 740 MW of the Dabhol plant's capacity in April this year, using naphtha as fuel. The 740-MW unit ran until July 4, to meet peak season demand in western Maharashtra. It is likely to be restarted in October, when electricity consumption in the state picks up again. RGP has recently been seeking naphtha until early next year to fuel the plant.

Source: Singapore Platts, New Delhi, August 25, 2006
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