Rebecca A McDonald

NEW DELHI, May 9: US multinational Amoco Corporation has drawn up an ambitious Rs 21,600 crore ($6 billion) investment plan to exploit and transport five million tonnes per annum of liquified natural gas (LNG) from Qatar to Hazira in India. The LNG will be shipped in special charter vessels to India.

The LNG will be utilised to charge power complexes in the Hazira hinterland with a cumulative capacity of a whopping 4000mw.

A high-powered Amoco team headed by Natural Gas Group president Rebecca A McDonald is in New Delhi to discuss the project with government officials.According to estimates prepared by the multinational, an investment of $3.4 billion will be required to own, explore and evacuate natural gas in the offshore areas of Qatar. Another $600 million will be needed to set up port, de-gassification and pipeline facilities at Hazira.

Amoco hopes to find adequate demand for LNG in western India. "There is around 2000mw of naptha-based power in and around Hazira, which can switch to natural gas because it will be more economical to do so," Amoco International India managing director Raj Puri said. The 500mw Essar power project in Gujarat is another candidate. The two gas-based power projects of NTPC in the region, which are functioning at less than nameplate capacity because of non-availability of feedstock from the grid, can also draw gas from Amoco.

One of the largest natural gas producers in the world and the biggest private holder of gas reserves in the western hemisphere, Amoco will be directly involved in building power plants with a fresh capacity of 2000mw in the region. This will be over and above the 2000mw which is projected to switch from naphtha to gas. The outlay on new power projects will be $2.4 billion.

The funding details are yet to be worked out. The company's power generation wing will be actively involved. "We are not thinking of 100 per cent ownership in power, but are aiming at strategic partnerships with other private producers," McDonald said.

The Amoco president is open to forging financial and knowhow relationships with anyone who is willing to join in. "A project of this magnitude will necessarily require an intricate funding pattern, and we are open to all options," she said.

A race to the finish

The proposed Amoco project will be in direct competition with a similar one drawn up by four of the country's largest oil companies, Indian Oil Corporation (IOC), Gas Authority of India (Gail), Oil and Natural Gas Commission (ONGC) and Bharat Petroleum Corporation (BPCL).

The quartet has formed a joint venture to set up two 2.5-million tpa LNG 7de-gassification plants and terminals, one on the east coast and the other on the west coast. Power projects with a capacity of 2000mw are to be attached to each of the terminals. The cost of the terminals is expected to be Rs 1,500 crore each, and the power projects will require investments of around Rs 16,000 crore. The proposal to ship gas instead of piping it gained circulation subsequent to the shelving of the grandiose Oman-India pipeline project.

Like Amoco, the joint venture proposes to ship LNG from the Gulf. But the Indian proposal does not entail being directly involved at the evacuation end of the project but cross-holdings involving the evacuator, the transporter, the power project promoters and the terminal owners have been mooted to reduce downside risks.

According to government sources, only one of the two projects can come up at a time. For, the investments involved are far too high, and international financiers are unlikely to risk their money on two similar mega projects at the same time. What is more, countries in the Gulf may fight shy of making long-term commitments of supplying 10 million tonnes of LNG only to India. Unless adequate confidence is built up on the financial and absorptive capability, it is unlikely that two similar projects can be bankable.

Amoco already claims to be ahead in the race. "Our's is a logical first project," asserts Amoco's Rebecca A McDonald. She is in Delhi to lobby for her proposal. She is, however, of the view that the demand-supply gap in power is wide enough in India for more than one such project to exist.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.