Govt may sell Dabhol LNG terminal to Reliance, GSPC

The government is considering selling Dabhol power plant's liquefied natural gas (LNG) import terminal to firms like Reliance Industries or Gujarat State Petroleum Corporation (GSPC) who can keep the cost of fuel to the plant low by pooling costlier imported LNG with cheaper domestic gas.

"The empowered group of ministers (EGoM) last month considered hiving off the LNG terminal but no decision has been taken as yet," said a source in the government.

Ratnagiri Gas and Power Project Ltd (RGPPL), the new owner of Dabhol, has not been able to tie-up long term LNG supplies as cost of power from the imported LNG, costing $10-10.5 per million British thermal unit (mBtu), comes out to Rs 4.40 per unit.

Considering the present global LNG market, it is expected that the new long-term supplies will be at a higher price than what RGPPL can absorb. The LNG terminal can be operated profitably by an organisation which has both low-cost gas as well as a new LNG import contract so that the two can be blended.

The official said the government had brought down the cost of electricity to Rs 2.83 per unit after pooling the $10-10.5 per mBtu price of 1.5 million tonnnes short-term LNG for Dabhol with Petronet's existing imports from Qatar to get a delivered price of $5.84 per mBtu.

"In the long-term, gas from Krishna Godavari fields of Reliance and GSPC will cost $4.40 per mBtu (the same price as Petronet's Qatar imports). This can be pooled with imported LNG to give Dabhol affordable fuel," he said.

Reliance has already expressed interest in taking over the LNG terminal of Dabhol while GSPC has intentions to build two import terminal on the west coast.

Petronet's Qatar imports are being used to subsidise Dabhol fuel cost as Petronet will be sourcing 24 cargoes of LNG to meet Dabhol plant's short-term fuel needs. Currently, five million tonnes per annum of LNG being sourced by Petronet LNG from Qatar is sold to end consumers at around $4.6 per mBtu.

"After pooling the two prices, the delivered cost of gas to Dabhol would be $5.73 per mBtu (without Customs duty on imported LNG) and $5.84 per mBtu (with Customs duty). The variable cost of electricity generation will be Rs 1.83 per unit to Rs 1.87 per unit," the official said. Added to this would be Re 1 per unit fixed cost.

The five million tonnes import facility adjacent to the 2,184 Mw Dabhol power plant will be operational by 2009 after the construction of breakwater.

The power plant will need 2.1 million tonnes of LNG and the rest will be sold to industries locally. The official said Petronet had been given the responsibility of procuring 1.5 million tonnes per annum of LNG on spot basis for "short-term" supplies.

"Up to September 2009, LNG will be re-gasified by PLL at its Dahej plant in Gujarat and gas would be transported through a new pipeline connecting Ratnagiri to Dahej," he said.

RGPPL, equally promoted by National Thermal Power Corp (NTPC) and GAIL (India) Ltd, will source long-term LNG supplies. The pool pricing would mean that Petronet LNG's existing customers would have to pay over $1.2 per mBtu more from June/July this year.