Published in Oil & Gas Executive Report, Volume 2, Number 3, 1999, pages 18–21,43.
The old saying, "What comes first, the chicken or the egg?" is particularly pertinent to the electricity and natural gas business. As developers, we're continually challenged to simultaneously build assets and markets for these assets. When we commit to developing both electricity and natural gas assets, the challenge becomes especially difficult. A company cannot develop a power project until the source of fuel is secured. Nor can an enterprise allocate resources to purchase and deliver fuel without a large, guaranteed customer.
Enron's philosophy has been to develop the chicken and the egg simultaneously. It is not an easy task and it requires the ability to envision how energy markets will develop. You also need skills to successfully communicate your conceptualization to partners, governments and lenders. But the risk is that if a company resists undertaking the challenge, it forgoes a chance to make a meaningful difference in how emerging markets can satisfy their huge demands for energy. Enron's experience in India is an excellent example of how successful a two-pronged development strategy can be. We soon will celebrate the opening of phase I of the 826-megawatt (MW) Dabhol power plant in the state of Maharashtra. At about the same time we will reach financial close for phase II of Dabhol, which is scheduled to bring on line 1,624 megawatts more by the end of 2001. Electricity, however, is just one component of Dabhol. Because phase II includes the infrastructure to import and regasify liquefied natural gas (LNG), it instantly creates a beachhead for a major natural gas market in India.
From the day the Indian government invited Enron to India in 1992, we recognized the existence of a large market for natural gas. The commodity already was in high demand. We knew from our experience that industrial use of natural gas would rise with supply levels, particularly in light of the nation's ambitious program to encourage power development. Natural gas-fired power plants make sense in India. They are quicker and less expensive to build than coal plants and emit far fewer pollutants than other fossil fuel-based generating stations. And, they satisfy India's need for clean energy solutions.