The government has asked Reliance Industries Ltd (RIL) to supply natural gas from its eastern offshore KG-D6 fields to the beleaguered Dabhol power plant in Maharashtra as importing LNG is costing the nation’s biggest gas-fired plant dear.
An Empowered Group of Ministers (EGoM) on pricing and utilising natural gas, headed by External Affairs Minister Pranab Mukherjee, last month decided that Ratnagiri Gas and Power Pvt Ltd (RGGPL), the owner of the Dabhol power plant, will get 1.4 million standard cubic metres per day (mmscmd) gas from KG-D6 from January, say official sources. This will rise to 2.7 mmscmd from April and the plant’s full requirement of 8.5 mmscmd will be met by this source from September 2009.
RIL is to begin production from its prolific KG-D6 fields off the Andhra coast in January 2009 with an initial output of 5 mmscmd. This will rise to 25 mmscmd by March and to 55 mmscmd by July 2009.
Petroleum Secretary R S Pandey confirmed the EGoM decision saying supplies to RGGPL would be within the overall quantity allocated to the power sector.
While the fertiliser sector will continue to get top priority in getting KG-D6 gas, RGPPL is only being given a time advantage. “The fertiliser sector will have the first right and its requirement of 14 mmscmd will be entirely met (from KG-D6),” he said.
Dabhol at present gets about 5.4 mmscmd imported gas for two of its three units at $4.98 per million British thermal unit (mmBtu). Petronet LNG imports 1.5 million tonnes a year of LNG from RasGas of Qatar at $8.5 per mmBtu, but since this price is too high, the rates are averaged with cheaper long-term LNG imports to arrive at a price of $4.98 per mmBtu.
“The $8.5 mmBtu price is valid till December and is bound to rise by at least 50 per cent from January. Also, the rates of long-term LNG will rise by 25 per cent to $3.12 per mmBtu in 2009. So even after averaging out these two prices the rates will be too high,” said another official, who wished not to be identified.
“As an alternative, KG-D6 will now be sold to Dabhol at the government-approved rate of $4.20 per mmBtu,” he said. But NTPC, part-owner of the company that now runs the plant, had previously opposed buying gas from RIL as it was fighting a court case against the Mukesh Ambani-led firm over a 2004 contract.
“Even before the latest consideration came up, RIL had last year offered to meet the entire 8.33 mmscmd demand of the three units of Dabhol for $4.2 per mmBtu, but NTPC refused the offer,” the official said.
NTPC had stated that it could not buy the gas until the issue of non-supply of 12 mmscmd gas by RIL against a 2004 tender was settled. Interestingly, the power ministry has proposed that of the 18 mmscmd gas allocated for the power sector from KG-D6, only 7 mmscmd should go to NTPC.
The official said the power ministry’s list of consumers of 18 mmscmd gas from KG-D6 did not include Dabhol in the first place. “If Dabhol is to be included now, the entire allocation will have to be reworked,” he said.
Besides NTPC, the ministry had identified Essar Power and Torrent as the likely consumers of the fuel in line with the gas utilisation policy approved by the government in June. The policy made it mandatory for RIL to first supply gas to existing gas-based urea plants and then give three million standard cubic meters per day to LPG plants.
Thereafter, up to 18 mmscmd of gas was to be given to gas-based power plants that were lying idle/under-utilised or likely to be commissioned during 2008-09. The allocation was done for initial 40 mmscmd gas output from KG-D6.
