With Fertilisers and Chemicals Travancore (FACT) deciding to withdraw from purchasing LNG supplied by the Petronet LNG Ltd (PLL) owing to the high cost, the future of Petronet LNG’s terminal at Puthvype looks bleak. Right now, FACT and BPCL Kochi Refinery are the two major customers of LNG supplied by PLL. Any crisis in operating the terminal may also affect a slew of LNG-based projects which are on the anvil.
With the withdrawal of FACT, BPCL Kochi Refinery is the major customer of LNG.
It may be noted that FACT authorities had to take the tough decision just 10 days after the terminal was dedicated to the nation by Prime Minister Manmohan Singh. The terminal was dedicated to the nation on January 4, although commercial supply of the fuel from the terminal commenced in August last year.
The terminal received its commissioning cargo from RasGas Qatar LNG in. The `4,200-crore terminal is now utilising only 8 per cent of its total capacity as the Kochi-Mangalore and Kochi-Bangalore pipelines are yet to be laid.
Apart from the high price of the fuel, the PLL also faces issues such as under-utilisation, delay in laying of pipelines and difficulty in finding new consumers. PLL authorities have already made it clear that the Kochi terminal was running at an annual loss of `300 crore.
With FACT withdrawing, the loss is likely to aggravate as it was a major customer. FACT requires approximately 40 million cubic metre of LNG for running the ammonia plant continuously for two months.
It was expected that the five million tonne- terminal, built with an investment of `4,200 crore, would cater to the energy requirements of industries in the state as well as neighbouring states in south India.
“The industrial sector in Kerala and other states will not benefit if the gas is supplied at this rate,” pointed out a trade union leader.
Meanwhile, an official of the PLL clarified that the price of LNG in the global market was very high during November and December. “Since PLL is making spot purchase, global price will be a major factor that decides the price of gas supplied in India,” the official said.
LNG Terminal project was realised after 12 years of its conception. The terminal is the first of its kind in south India.
M P Sukumaran Nair, a Kochi-based energy expert, pointed out that the issue could be resolved only through allotment of domestic gas and by introducing a price pooling mechanism. “If consumers withdraw from purchasing, the PLL will also have to face the challenge of storing imported gas. Though they have storage facility, the expense for it would escalate the loss, which is estimated to be `300 crore,” Nair said.