India advancing LNG for power generation initiative

India has launched a major initiative centering on the use of liquefied natural gas as fuel for future power generation projects.

According to official estimates of future electric power demand, India needs to install nearly 57,000 MW of power capacity, but estimates by the Ministry of Power indicate only 34,000 MW is possible-leaving a gap of 23,000 MW.

Officials approved formation of a joint-venture (JV) company to import and create infrastructure for LNG projects throughout India.

As part of the initiative, the Indian government will allow refineries to diversify into power generation. Refineries will be allowed to take part in power generation projects only through the utilization of refinery bottoms as fuel.

LNG as a fuel source

There are no power plants in India that use LNG as a source of fuel, although natural gas is widely used in the petrochemical, fertilizer, and power sectors.

The JV consists of Indian Oil Corp. Ltd. (IOC), Oil & Natural Gas Corp. (ONGC), Bharat Petroleum Corp. Ltd. (BPCL), and Gas Authority of India Ltd. (GAIL).

With authorized capital of about $480 million, the JV will seek to advance LNG projects and pursue a partner with upstream project interests.

The JV will have an equity position of 50%, and the balance of the equity will be offered to private parties, either Indian or foreign.

LNG interest builds

Numerous Indian and foreign concerns have plans or have shown interest in advancing LNG projects in India.

Popularity is building because LNG will be permitted for use as a fuel source for future power and fertilizer units.

The Tamil Nadu government is in the process of establishing 10 power plants that would be based on imported LNG, and an Enron Corp. unit is building a combined-cycle power complex in Gujarat state that would rely on LNG (OGJ, Dec. 19, 1996, p. 24).

But other companies, including Indian firms, have shown interest in or plan LNG projects at some point.

"Along with the French (company) Total SA, Hindustan Petroleum Corp. Ltd. (HPCL) is investing more than $1 billion in setting up LNG terminals in the country," said Ashok Mehta, HPCL executive director.

An initial capacity of 2.5 million metric tons/year is slated for Andhra Pradesh, with an ultimate objective of 6-7 million tons/year.

More interest, projects

Seventeen foreign concerns, including Enron, Mobil Corp., BG, and Royal Dutch/Shell Group, have submitted bids to join in IOC/ONGC/BPCL/GAIL group projects throughout the country.

The group plans to build two LNG terminals with a capacity of 2.5 million metric tons/year each. One will be built at Ennore in Tamil state, and the other at Mangalore in Karnataka state.

Amoco Corp. is planning a 5-million metric ton/year terminal at Hazira, Gujarat state. The complex will handle importing, liquefaction, regasification, and supply.

Shell, through its Shell India Pte. Ltd. unit, has identified a future power project in Tamil Nadu that would use LNG.

BG is preparing a feasibility study on LNG importation, liquefaction, and supply, and officials said BG tentatively plans an investment of $1 billion in the IOC/ONGC/BPCL/GAIL group projects.