The official opening of liquefied natural gas terminal of Petronet LNG Limited by the Prime Minister Manmohan Singh on Saturday will be the realisation of an ambitious project of Kerala. But the project has a long journey ahead for utilising its capacity to the maximum. The terminal with 5 MMTPA capacity requires bulk consumers to utilise its full capacity.

The gas started flowing from the terminal after the first vessel from Qatar carrying 1,23,000 cubic meters of gas offloaded it in August-September. The second vessel with 1,38,000 cubic meters of liquefied gas reached the terminal a month later.

The capacity utilisation has remained below 10 per cent with FACT and BPCL Kochi being the only two major consumers now. Lower capacity utilisation would mean higher operating costs, which could affect the viability of the project in the short-run though it is certain that the project would attain higher capacity utilization in the coming years. Several bulk industrial users are adopting a wait-and-watch policy, but the clean fuel is set to invade the industrial belt sooner than later.

KMML, Kollam, a public sector unit, is among major units intending to utilize natural gas for fuel needs. HLL unit in Thiruvananthapuram, KSRTC and NTPC Kayamkulam are among the prospective customers.

KSRTC has plans to switch from diesel to LNG, but administrative hurdles remain to be overcome. The plan is to have a pilot project for supply of compressed natural gas for automotives. NTPC is yet to enter into a deal with Petronet LNG. The undersea pipeline meant to take gas from Puthuvype to Kayamkulam has not been laid.

Industrial usage apart, the domestic consumption of gas is expected to take a firm position within a couple of years. Petroleum & Natural Gas Regulatory Board, the authorized body to distribute natural gas to homes under the City Gas project, has already initiated procedures to invite tenders for making infrastructure for domestic supply of gas.

Petronet has projected that domestic gas demand will go up from 15 mmscmd at present to 36 mmscmd by 2020. Power sector will have greater dependence on gas in the years ahead. The requirement will go up from 86 to 202 mmscmd during the period while fertilizer manufacturers’ need for gas will increase from 60 to 106 mmscmd during the same period.

One of the major challenges faced by the project is the pipeline laying work in Kerala as well as Tamil Nadu. Pipelines have been planned to be laid along Kochi- Kanjirkkod-Bangalore and Kanjirkkod-Mangalore routes. The work, being executed by Gail India, has been moving at a slow pace. The project in Tamil Nadu hit a road block after farmers opposed it and the Tamil Nadu government supported the farmers. Though there is a temporary relief in the form of a court order permitting Gail’s project, obstacles in the path of pipeline-laying have not been removed altogether.

Delay in the laying of pipelines would mean disruption in the schedules for gas distribution to various industries along the route. Various potential end-users such as Apollo Tyres, Milma, Kottakkal Aryavaidyasala and steel industries, Palakkad, could be connected to the network once the pipeline project is completed. GAIL had received approval for laying 1,114 km pipeline in the Kochi – Kanjirkkod – Mangalore – Bangalore route, with an investment exceeding Rs.3,000 crore. Gail intends to link the Kochi-Bangalore pipeline to the national grid, with Dabhol-Bangalore gas pipeline having been commissioned. After having laid the pipeline from the terminal at Puthuvype to Udyogamandal in Kochi, Gail is in the process of executing the work in the Kochi-Palakkad route.

IOC is planning to set up an LNG terminal, with an outlay of over Rs.4000 crore, at Ennore near Chennai. The Ennore project could pose challenges to the Kochi project if the latter fails to get connected to the national grid within a reasonable time frame.

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