Gas-Petrochemical-Power Plan Comes Together for India's GAIL, Petronet and NTPC

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Researched by Industrialinfo.com (Industrial Information Resources, Incorporated; Houston, Texas). Three Indian state companies have moved, by fits and starts, into interdependent projects in Kerala. GAIL India (Gas Authority of India, Delhi) is to construct a major petrochemical complex, Petronet is setting up an LNG terminal, and NTPC (National Thermal Power Corp, Delhi) is looking to use the LNG coming from Gail's plant to power a massive expansion at its Kayamkulam power station. The synergies evident in the clustering of the three entities have required compromises and relocations of proposed projects among the parties, under pressure from the central and state governments.

Engineers India Limited (EIL) (New Delhi) will complete a prefeasibility report on the Kerala Gas Cracker Complex in the Kasargod district for Gail this month (April). The $1.6 billion gas-fired petrochemical complex. In 2001, the Kerala State Industrial Development Corporation (KSIDC) commissioned a feasibility study from EIL, which included proposals for a naphtha cracker for the production of ethylene, polypropylene, benzene, and LDPE. This study also projected a significant demand-supply gap for these products beyond 2007 - 2008.

The $1.6 billion gas fired petrochemical complex will be constructed on 400 acres of vacant land, which is being acquired from Fertilizers and Chemicals Travancore, a potential customer, for the output of the petrochemical complex. GAIL has now entered an alliance with Petronet for importing gas through the 2.5-million-ton-per-year Pertronet Kochi LNG import and re-gasification terminal to feed the Kyamkulam power plant. GAIL can also use the gas stream supplied to NTPPC for the extraction of heavy gas to use in the petrochemical complex. Naphtha monomer feedstock will be sourced from Kochi refineries, with any balance required being imported. The dual feedstock facility would mean a higher project investment than originally estimated and would also change the product mix, a KSIDC official said.

The Union Petroleum Ministry (UPM) had previously intervened to squash a GAIL scheme to build a separate LNG terminal down the coast and build the cracker in Kasargode. UPM also diverted Petronet's focus on Mangalore to Kochi, thus bringing the GAIL, Petronet, and NTPC virtuous supply triangle into being.

The cracker complex represents GAIL's and the central government's largest investment in Kerala over the past few decades. The local state government will probably take only a nominal equity holding in the venture. The Indian Prime Minister has promised $4.25 billion in investments for various projects in Kerala.

The biggest winner in the gas feeding chain is the NTPC Kayakulam power plant, which will undergo a massive $1.6 billion expansion in generating capacity, from 350 MW to 2,300 MW, and replace naphtha with LNG as fuel. The 1950 MW expansion project will be completed in three phases, each 650 MW modules. The first module should be completed by the end of 2008 and the other two by the end of 2009. The first two units will be gas turbine powered and the third will use steam generated by the two gas turbines. Through the change to gas and the feedstock savings, the total cost of production will come down, as the third turbine's feedstock is nominally free. The cost of power at the plant will come down by about 45% per unit generated.

Over the past 18 months the developments finally agreed to in Kochi and Kayakulam would have, at many times, seemed impossibly pie-in-the-sky, with stakeholders moving in opposed directions. Now, with the new dispensation, mid-stream and downstream industrial development should get a much needed boost in Kerala.

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