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MAY 08 2014

Andhra's bifurcation delays Petronet LNG project in Vizag

  • Economic Times, ET Bureau / Hyderabad
  • Created: Thu 08th MAY 2014

The long wait for fuel for almost 3,000 megawatts (MW) of stranded power plants in Andhra Pradesh may get longer, with India's first liquefied natural gas (LNG) terminal on the east coast likely to be delayed because of the bifurcation of the state.

The 5 million-tonne Gangavaram Port LNG terminal, being developed by Petronet LNG Ltd in Visakhapatnam, will be held up till a new government comes to power in Seemandhra, the residual state formed after Telangana was carved out of Andhra Pradesh, two officials at the company confirmed.

According to R.K. Garg, director of finance, Petronet LNG, the joint venture companies-Petronet LNG and Gangavaram Port-had sought approval from the state government a year back, but approvals have been delayed since there is no government in the state.

"Since the Gangavaram Port has signed a concession agreement with the state government while building the port and since the LNG terminal is coming within the port, the port has to take an approval from the state government to set up a new facility inside the port. It is an important approval and is mandatory for building the terminal, said Garg, adding that Petronet LNG will try to expedite the process of awarding sub-contracts to build the terminal, once approvals come in.

In May 2012, Petronet LNG, along with Gangavaram Port announced a joint venture agreement to set up an LNG terminal at the port which would primarily supply gas to the fuel-starved power plants in Andhra Pradesh. The project was announced at a cost of Rs.4,500 crore and was expected to come up by early 2016.

"There are no major hurdles for the LNG project," said a second senior executive at Gangavaram Port, adding that since the entire administrative mechanism is focused on general elections and bifurcation, clearances have been delayed.

"After the elections, the port will be able to secure the necessary approvals," he added.

A revised deadline for the terminal coming onstream has not been announced by port officials or Petronet LNG.

While a delay in the project has no immediate financial implications for Petronet LNG, analysts say it would hurt power plants which have been starved of gas since February 2012, when gas supply from the Krishna-Godavari (KG) basin of Reliance Industries Ltd (RIL) in Andhra Pradesh started tapering off.

"There are around 8,000 MW of power plants which are currently stranded in South India for want of gas. A timely completion of the LNG terminal would have ensured that the gas reached some of these power plants in the next two years," said Salil Garg, director of corporates at India Ratings and Research, a Fitch Group company.

RIL has said that any incremental gas production from RIL's KG basin is not expected to come before 2018. Hence an early commissioning of the LNG terminal would have eased the supply crunch in power in the state.

The Central Electricity Authority (CEA), a statistical and monitoring body under the power ministry, pointed out in its annual performance status report in April 2014, that almost 3,000 MW of gas-based power plants in Andhra Pradesh had produced no or minimal power in last one year.

The report added that the peak power deficit in the southern region of the country-Andhra Pradesh, Karnataka, Kerala, Tamil Nadu, Puducherry, Lakshadweep-was 1,573 MW or 4.4%. The electricity requirement of the region was 35,736 MW, of which the supply was 34,163 MW.


Andhra Pradesh Karnataka Tamil Nadu Puducherry Kerala Lakshadweep Reliance Industries limited Fitch Central Electricity Authority Indus Liquefied natural gas Petronet LNG Ltd Electricity India

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