NTPC won't buy gas from Shell

Company finds price economically unviable, says will not renegotiate.

The National Thermal Power Corporation has decided not to buy natural gas from Shell as it found the price offered by the company economically unviable.

It has also ruled out the possibility of any renegotiation. "There is no question of renegotiating the gas price offered by Shell," outgoing Chairman and Managing Director C P Jain told Business Standard.

NTPC is now talking to other gas suppliers for its power plants. The Energy Coordination Committee headed by Prime Minister Manmohan Singh had decided that fresh imports of LNG may be made on the basis of marginal cost (prevailing international prices) at a level viable for the power sector without being constrained by prevailing domestic prices.

Shell India Country Head Vikram Mehta was not available for comments. NTPC's refusal to buy gas comes in the background of Shell's contract with Gujarat State Petroleum Corporation Ltd ending early this year. Post ending of contract, Shell's tugboats were temporarily redeployed due to lack of consignments. Shell is now on the lookout for new customers.

Earlier this year, a committee of secretaries had wanted NTPC to further explore the possibility of a deal with Shell and others with an eye on bringing down the cost of gas to levels acceptable to the power utility.

"The power ministry had informed the petroleum and natural gas ministry that Shell's price was very high," an official said. Shell's offer worked out to $12-15 per million british thermal units (MMBTU), as compared to the prevailing market price of about $5 per MMBTU.

"The special Northern Regional Electricity Board meeting held last November decided that the rate offered by Shell would translate into an energy charge of Rs 5.50 per kwh. This was too high and therefore not considered," officials added.