Petronet's New LNG Plant to Operate at 10% Capacity, as Pipeline Not Ready

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Written by Richard Finlayson, Senior International Editor for Industrial Info Resources (Sugar Land, Texas)--Pipeline construction for state-owned Petronet's (BSE:532522) (New Delhi, India) new liquefied natural gas (LNG) terminal in Puthuvype, India, is behind schedule, which means that the facility will be commissioned at only 10% of its full capacity.

It has been reported that the terminal will be commissioned by the end of August, but this has not been officially confirmed. The first LNG consignment is expected to arrive by sea from Qatar by the end of this month or in early August, and it will take Petronet at least a month to prepare for the supply. The LNG supply arrival will not synchronize with the facility's state of readiness, as the laying of the pipeline network in the state of Kerala is incomplete.

The $800 million, 5 million-ton-per-year LNG terminal will supply only 500,000 barrels of LNG in its first phase. This low level of plant utilization will mean that the per-unit supply cost of LNG will be higher for Petronet. The terminal needs to operate at a minimum 70% capacity, which is equivalent to 3.5 million tons a year, to run at optimum efficiency. These losses during transmission also will make prices to the consumer higher.

Current LNG supplies from Qatar at current rates will be priced at $12 per million metric British thermal units (MMBtu) from 2014. A new contract with Australian LNG sources is priced at $14.5 per MMBtu.

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