India's GVK Power and Infrastructure Contemplating Investment on LNG Terminal

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Researched by Industrial Info Resources (Sugar Land, Texas)--Indian private-sector power developer GVK Power and Infrastructure Limited (BSE:532708) (Secunderabad, Andhra Pradesh) is evaluating the possibility of constructing a liquefied natural gas (LNG) terminal to provide fuel to its gas-based power plants in India. GVK Power has submitted relevant proposals to an empowered group of ministers for additional allocation of natural gas feed for its existing and future power projects. GVK Reddy, Chairman of the GVK Group, said that although the committee is likely to award natural gas feed for the group's power projects, the LNG terminal would work as a backup fuel option for the company. The power plant augmentation will be completed in the next 30 months.

GVK Group is a diversified conglomerate with business interests spanning construction, infrastructure and power. The group has an asset base of $1.2 billion and an order book value of $3.6 billion. Presently, GVK Power is adding 800 megawatts (MW) of capacity to its Gautami and Jegurupadu power plants in Andhra Pradesh. The company is going ahead with augmentation projects before receiving gas allocation for the power plants.

GVK Power's project pipeline is expected to add 5,000 MW to its power generating capacity over the next few years. Sources have indicated that, while the cost of procuring gas from the terminal may be higher than procuring it from the Krishna-Godavari basin in Andhra Pradesh, the motivation for GVK Power to proceed with the project is the growing electricity demand-supply gap in the country. Several private-sector power developers, including GVK Power, are focusing on constructing and augmenting power plants to bridge the gap. Industry bodies, reports and consulting organizations have identified sustained power supply as the key economic growth driver for India. Financing arrangements for the power plants have also been completed.

GVK Power has submitted an application for the 1,000-MW expansion of the Goindwal Sahib power project in Punjab. Other ongoing projects include the 500-MW Goindwal Sahib, the 330-MW Alaknanda, the 500-MW Krishnapatnam and the 400-MW Gori Ganga power projects. Recently, the Jammu and Kashmir government awarded the 700-MW Rasle hydropower project on the Chenab River to GVK Power. This project is considered to be the first public-private participation initiative in the state.

As of April 2009, India's natural gas reserves were about 1,074 billion cubic meters. According to a report published by McKinsey & Company (London, England), the country's natural gas demand, which is currently 166 million standard cubic meters per day, is forecast to reach 320 million standard cubic meters per day by 2015. Presently, India's natural gas demand is fulfilled by 132 million standard cubic meters per day of domestic production. The remainder is imported.

In a related development, public sector energy utility Oil & Natural Gas Corporation Limited (BSE:500312) (New Delhi) has announced plans to invest $5 billion over six years to develop gas fields. The company is currently seeking approvals from regulatory bodies to invest funds in nine gas fields in the eastern part of India. By 2016, these gas fields are expected to produce 35 million standard cubic meters per day of natural gas.

In January this year, a report by state-controlled transmission company GAIL (India) Limited (BSE:532155) (New Delhi) indicated that by 2013-14, the availability of gas in India will increase at an annual compounded growth rate of 23% to 312 million standard cubic meters per day. In the next three years, GAIL is investing between $661 million and $771 million to expand its gas transmission capacity from 150 million standard cubic meters per day to 300 million standard cubic meters per day. In May, India's natural gas production grew 34.4%, reaching 4.59 billion cubic meters.

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Indian private sector power developer, GVK Power and Infrastructure Limited (BSE:532708) (Secunderabad, Andhra Pradesh) is evaluating the possibility of constructing a Liquefied Natural Gas (LNG) terminal to provide fuel to its gas-based power plants in India.