By Vinu Lal

Business Times Bureau

MUMBAI: With the Dabhol controversy in full swing, Enron has put on hold additional investments planned in liquefied natural gas (LNG) including fuel tie-up and marketing plans. As part of this strategic move, sources confirmed that an internal revamp of Metgas is being implemented, with over 15 employees--including 7 senior executives--being `redeployed' for this purpose. Metgas is an Enron subsidiary floated for LNG marketing and transportation purposes, with a planned capacity of 3 million tonnes and an initial investment of $60 million.

An Enron spokesperson admitted that the company is not keen on tying up in fuel for the moment and would wait till the current issues regarding the power project are resolved. He, however, refused to comment on Metgas' plans.

But a significant fallout of this development, say experts, is a likely adverse impact on tariffs of the Dabhol power project since the entire capital investments made in LNG infrastructure will be passed on to the final tariff.

``With Enron Phase I operating at 50 per cent capacity, it is an impossible scenario that Phase II will operate at 90 per cent. This means that the entire 2.1 million tonnes capacity tied up from the Middle East will not be fully utlised, which will push up tariffs since these are take-or-pay contracts. Moreover, the capital investments made in basic infrastructure for 5 MMTPA is included in the project cost of Phase II,'' said an LNG expert, who represents India in international forums.

To make matters worse, it is learnt that the Union government is planning to withdraw a Rs 300 crore import duty concession given to Enron for the LNG plant. This is because the concessions had been given under project import status for the entire 5 million capacity. If the company is not planning to utilise the entire capacity, the concessions will be granted only to the LNG capacity used for the Dabhol project. As per calculations made by the ministry of petroleum and natural gas this additional duty concession amounts to around Rs 300 crore.

The company is also reportedly scaling back its plans to build a pipeline to transport LNG from its terminal. Besides, there are several approvals still pending from the Centre regarding pipeline investments.

Meanwhile, Enron had signed MoUs with several companies including Rashtriya Chemicals and Fertilisers, IndianOil, Ispat Energy and others for supply of LNG, though these companies have adopted a wait-and- watch stance due to the uncertainties of the Dabhol project.

As per the plan chalked out by the company, the initial 2.1 MMTPA capacity will be coming from the Middle East and the remaining three million tonnes is to be sourced from Malaysia. The plan was to market this additional capacity to industries in Maharashtra and Gujarat through pipelines specially made for this purpose. The total pipeline length is in the region of 400 kilometres.

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