GAIL throws lifeline to Kochi LNG as it restarts gas pipeline construction

KOLKATA (miningweekly.com) – Gas infrastructure major GAIL India has started work on a stalled 438 km gas pipeline, throwing a lifeline to the Kochi liquefied natural gas (LNG) terminal, languishing at less than 10% capacity utilisation.

GAIL last week officially restarted work on constructing the pipeline connecting Kochi in the southern province of Kerala, traversing through Tamil Nadu province and terminating in Mengaluru in Karnataka, entailing an investment of $518-million.

The pipeline project has been scheduled for completion by December 2018, a company official said.

With the gas transportation infrastructure in place, Kochi LNG operator Petronet LNG Limited (PLL) is expected to ramp up its capacity utilisation at least four times by 2019.

In the absence of connectivity with major gas consumers in the hinterland, the five-million-ton-a-year Kochi LNG terminal is currently operating at below 10% capacity utilisation.

GAIL’s gas transportation infrastructure connecting various industrial belts in southern India had been key to the Kochi LNG terminal being set up in 2013. However, the terminal had been largely idled since then, as GAIL had been unable over the past several years to construct the pipeline in the face of opposition from farming communities in provinces like Tamil Nadu, who resisted the pipeline traversing their farmland.

According to a GAIL official, of the 438 km pipeline, only 41 km had been constructed since 2013. The second phase construction was launched last week and the third and last phase, which would connect Kochi terminal to the end point at Mengaluru, would be awarded in time for full completion by December 2018.

PLL, which invested $714-million in the Kochi terminal, has been incurring losses in the absence of transportation infrastructure. The terminal has been able to import only one LNG shipment once every two or three months for two of its sole buyers – Bharat Petroleum Corporation and Fertilizer and Chemicals Travancore, as both these companies have plants located in Kochi.