GAIL to initiate operations in Dabhol by September 2006

GAIL (India) has set itself a deadline of September 2006 to start operations at the Dabhol power plant in Maharashtra, chairman and managing director Prashanto Banerjee said on Wednesday. However, he said, this would depend on when the assets of the project are transferred to Ratnagiri Gas and Power Pvt. Ltd.

The gas transmission major, along with National Thermal Power Corporation has been entrusted with restarting the 740 mw gas-based Dabhol power project.

"We are in talks with five countries-Australia, Malaysia, Oman, Qatar and Abu Dhabi in UAE, for sourcing liquefied natural gas (LNG) for the project. I am confident that in the next couple of months, we will secure LNG to restart the plant," Banerjee said.

He was speaking at the inauguration of an air pollution research & diagnostic centre at a hospital here.

Banerjee's optimism on sourcing LNG is noteworthy, given the price constraints placed by the parties involved.

The Maharashtra government, which would be the primary customer, had said that it would not purchase power at more than Rs 2.30 a unit. Out of this, only Rs 1.20 a unit is allocable towards fuel cost.

At this rate, analysts estimate a ceiling price of $3.50 per million British thermal units for LNG supply.

On the viability of the power plant, Banerjee said that the project enjoyed unique advantages. The project will be exempted from customs duty and, as it was an integrated gas-based power plant, no sales tax was applicable on it.

"Besides, it is the only power plant where movement of gas through pipeline is not necessary, so a lot of savings can be achieved," he said.

On the domestic front, Banerjee said that GAIL had major plans to take compressed natural gas (CNG) to about 20 more cities within the next 4-5 years, including Pune and Solapur in Maharashtra. However it would depend on the availability of gas, as well as infrastructure.

"Given the current pipeline (network), we can cover 8-10 cities and for others we need another 2-3 years. We are also awaiting (gas) supply from other sources on the eastern coast, and more imports of LNG from the western coast of India," said Banerjee.

On GAIL's plans for China, the company was looking at exploration, transmission, and coal gassification projects in the country.

Banerjee said that they were in discussions with a number of companies, including Sinopec, as there are many business opportunities both within and outside China.

This was in addition to the 12 per cent equity stake GAIL has in the local city-gas distribution company, China Gas Holding. Banerjee informed that GAIL was also interested in distributing city gas in Beijing. He added that the company was also in talks for city gas projects in Iran and Turkey.