Ministry turns down REL gas demand

The petroleum and natural gas ministry has rejected a request by Reliance Energy Ltd for firm allocation of 0.36 million standard cubic metres per day of natural gas for its 220 Mw project at Samalkot, Andhra Pradesh.

Earlier, in February, the ministry had asked its power counterpart to submit its opinion on REL's request to convert its 'fall back' allocation of gas into a 'firm' allocation.

The power ministry did not send a reply to the query till July 24, following which the petroleum ministry has now decided to send a reply to the Prime Minister's Office.

The refusal comes within days of the petroleum ministry rejecting Mukesh Ambani's Reliance Industries Ltd valuation formula for gas sales to Reliance Natural Resources Ltd, an Anil Dhirubhai Ambani group company.

The petroleum ministry is of the opinion that an increase in supply to the Samalkot combined cycle power station will result in pro-rata reduction in supply of gas to other power plants.

"Petroleum secretary M S Srinivasan agrees that the 'fall back' allocation cannot be converted into a firm allocation," official sources said.

When contacted, an REL spokesperson declined to comment. The company's Samalkot plant requires a supply of 0.94 MSCMD of gas to operate at a plant load factor of 85 per cent, whereas it received a supply of only 0.59 MSCMD of gas in 2005-06, resulting in a plant load factor of around 45 per cent.

The average gas supply that the plant has received since June 2006 is 0.52 MSCMD, resulting in a plant load factor of around 42 per cent.

As per the fall back allocation, spare gas production is made available only after the firm allocation requirements of consumers are met.

Due to the gas shortage in the Krishna Godavari Basin, supplies to power plants are being made on pro-rata basis on the basis of a firm allocation.