Gail, NTPC to tie up for LNG import for Kayamkulam

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New Delhi, Feb 10: Gas transportation major Gail (India) Ltd and power generation major National Thermal Power Corporation (NTPC) are in talks to enter into an alliance to scout for liquefied natural gas (LNG) abroad.

Gail will bring in its experience as a gas marketeer as well negotiating skills in overseas gas deals while NTPC will provide a large consumer base. According to industry sources, the proposed alliance aims to source LNG to fuel NTPC’s Kayamkulam plant in Kerala as well as gas to be sold in the southern region by Gail. The present 350 MW generation capacity is sought to be augmented by 1,950 MW.

This search for LNG will test the theory that the LNG price for long-term deals in several gas producing countries like Nigeria and Yemen will come down if the purchasers are direct and large consumers of the gas.

Interestingly, Gail is picking up a stake in an integrated LNG-cum-power project in Ennore, Chennai, promoted by the Birlas. The project is yet to take off.

So far, public sector companies have procured LNG without sewing up the consumer end. In the case of the only LNG supplier in the country, PLL, the price is around $4.2 per million british thermal units (mmbtu). In the Iran LNG deal, which is yet to be concluded, the price is likely to be as high as $4.6-4.7 per mmbtu, if the current crude prices prevail.

The flip side of a large consumer like NTPC is the tolerance to high LNG prices. This, since power plants compete on basis of the fuel cost. Hence, a plant having a higher fuel cost will generate less compared to one having a lower fuel cost.