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The cash-strapped Ratnagiri Gas and Power Pvt. Ltd (RGPPL) plans to call for bids by the end of October to lease out a part of its liquefied natural gas (LNG) terminal capacity. It is looking to earn around Rs150 crore in the year ending March 2011 from this. The firm had earlier called an expression interest, or EoI, which saw response from public sector firms such as Indian Oil Corp. (IOC), NTPC Ltd, GAIL (India) Ltd and private sector firms such as Mukesh Ambani-controlled Reliance Industries Ltd and Anil Ambani’s Reliance-Anil Dhirubhai Ambani Group (R-Adag).

GAIL and NTPC are the largest shareholders in RGPPL with a 28.33% stake each. The rest is held by the Maharashtra State Electricity Board and several banks.

“We had earlier seen a very encouraging response with eight companies evincing interest. We will now float the request for qualification for tolling (fees to use the terminal) for 1 million tonnes (mt), which will be an open tender,” said a senior RGPPL executive who did not wish to be identified.

The bids being called for are for the use of 1 mt of the terminal’s capacity between next month and May.

The subsequent year, RGPPL plans to offer 1.5 mt more of capacity, and earn an additional Rs225 crore. The terminal can be optimally used only between October and May because there is no breakwater that protects ships from choppy seas during the monsoon months.

The terminal has caught the private sector’s fancy because companies need to ensure LNG supplies for gas-fired power projects. India has only two LNG regasification terminals. Both are located in Gujarat; one is owned by Petronet LNG Ltd (capacity of 6.5 mt per annum, or mtpa) and the other by Shell India Pvt. Ltd (2.5 mtpa).

The Ratnagiri LNG terminal is part of an integrated power project at RGPPL that has an installed capacity of 2,150MW, but has been scaled down to 1,950MW.

The project is fuelled by natural gas, typically transported by ships in liquid form. The terminal has a capacity of 5 mtpa. While 2.1 mtpa will be required for the power project, the remaining capacity can be rented out.

While questions emailed to an external spokesperson for RIL and an R-Adag spokesperson remained unanswered, a senior NTPC executive who did not want to be identified said his company was interested in the terminal for shipping in gas for its own projects. 

A senior IOC executive who too did not want to be identified confirmed his firm’s interest in the terminal, but for other customers.

Analysts say leasing spare capacity at the terminal is a good way for RGPPL to ensure a stable revenue stream because of the significant demand for natural gas in India.

RGPPL, earlier known as Dabhol Power Co., was conceived in the 1990s and was originally promoted by Enron Corp. The cost of building the project was estimated to be Rs10,038 crore at the time of asset transfer to the government in mid-2005. It has since risen by Rs2,594 crore to Rs12,897 crore.

“Companies are getting attracted to this terminal as the short-term price of LNG is competitive. Even the location of the terminal is advantageous,” said a partner at a consulting firm, who did not want to be identified because his firm is working with one of the potential bidders.

The total supply of natural gas in the country is around 135 million standard cu. m per day, or mscmd, against a demand of 200 mscmd. Of this, LNG accounts for around 21 mscmd. Gas supplies through long-term contracts are not available because global demand exceeds supply. Gas producers typically get a better price in the spot markets than through long-term contracts.


Source - MINT