Gas pipeline chokes Puthuvype LNG terminal

Gas pipeline chokes Puthuvype LNG terminal

India, which relies on imports for natural gas, ‘exported’ LNG for the first time from the terminal in Puthuvype, in Kochi. The irony is that the terminal had to export LNG because its capacity could not be utilised domestically. As a last-ditch effort to escape from severe liabilities, Petronet LNG was forced to lease its terminal. Thus, multinational companies make use of this facility by bringing LNG in ships, storing it in tanks and exporting it to those who need it. The gain for the terminal is that it will get some revenue. But, because of this, Kerala is letting go a big opportunity to develop.

It was a decade ago that Petronet LNG Limited, in which major central public sector companies such as Gail and BPCL have a major stake, announced that it would build a terminal in Puthuvype along with Dahej in Gujarat.

It was the time when the demand for natural gas, as a fuel of the future that pollutes less and is cheaper, was rising all over the world. It had been years since industries and residences in many other states had been getting natural gas from places such Bombay High and the Krishna-Godavari basin through pipeline. In Mumbai, cooking gas was supplied to residences through pipelines that criss-crossed the city. Since it was not part of the national gas grid, Kerala had been denied this national asset. It was as a solution to this that a plan was made to import liquefied natural gas (LNG) from countries such as Qatar and Australia, store it at the Puthuvype terminal and take it to all parts of the state as gas.


Even though a terminal had been built in Dahej many years ago, and its capacity had been increased, no serious move had been made in Puthuvype. The first explanation was that there were no adequate customers. A study held later changed this perception. Not only that its capacity was raised from 25 lakh tonnes to 50 lakh tonnes. After the terminal was completed, the first ship came in August 2011. But, even after three years had passed, not even 1 per cent of the total capacity of 50 lakh tonnes could be used. The main reason is that a pipeline to supply gas has not been completed.

A total of 504 kilometres of pipeline has to be laid in Kerala. It should start from Puthuvype, split into two at Koottanad in Palakkad, and reach Bengaluru and Mangaluru.

Gail made arrangements for this by investing about Rs. 3,000 crore. But, only less than 50 kilometres could be completed in two years. This could be done only at different places in Ernakulam, Thrissur, Palakkad, Kannur and Kasaragod districts. In Malappuram and Kozhikode districts, not even an inch of the pipeline could be laid. The main hurdle is the inability of the state government to acquire land on time. In reality, the company needs only the right to use land. Considering the special situation in Kerala, there was even a plan to increase compensation and limit the usage of land. But, work has been disrupted because of local opposition.

The fact that the political leadership is not ready to explain the benefits of the project and allay the fears of the people is creating hurdles for the total development of the states. The result is that the northern districts of the state have been kept out of the national gas grid. As a result, Kerala is losing the competitive edge in sectors such as electricity generation and fertiliser production. The state government has also lost Rs. 1,000 crore of tax revenue a year. At last, the government has assured the company that it will be given facilities such as police protection to complete the project. But, it is not clear when will the work resume.

When the first ship reached Puthuvype, the price of one unit (mmbtu) of LNG in the global market was about $16. Then it rose past $20. Because of the price rise, FACT, the biggest public sector company in the state, stopped using it. When the price of LNG fell along with that of crude oil to below 10 dollars a unit, the company’s problem was financial difficulties. Whatever, FACT has started using gas again. It is a big gain that LNG could be used as raw material, instead of the costly naphtha, to produce ammonia. The company needs 3 lakh tonnes every year.

At the power plants in BPCL’s Kochi Refinery in Ambalamugal, LNG is used as fuel. When the big expansion of the refinery is completed next year, there will be great opportunities for the petrochemical industry. Gas will help small and big ventures in the petrochemical complex to operate profitably.

What is being lost is the opportunity to bring gas as cheaper and less polluting fuel for the industry and homes throughout the state. If it comes, it will pave the way for many more units to come up in this sector and generate employment.

What the state government is waiting for is the implementation of the city gas project. It calculates that when gas reaches homes and hotels through pipes for cooking and as CNG for vehicles, the people will become aware of its advantages and lower their opposition. A big section of Malayalis, who have experienced all these things in other states, can for the time being forget the question why it takes so long for people to understand. Whatever, the expectation is that it will be first implemented in Kochi.

In one year, gas can be supplied to homes and vehicles through pipelines, said Rajeev Sharma, the director and CEO of IOC Adani Gas Limited, which has got the permission for the project. It can be hoped that Adani Group, which maintains close ties with the central government, will be able to make this project a success.

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