NTPC close to inking contract for gas block in Nigeria

NTPC close to inking contract for gas block in Nigeria
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First Published: Sat, Aug 18 2007. 01 54 AM IST

NTPC chairman and managing director T. Sankaralingam (left) had articulated the company’s focus on securing fuel supplies during its annual general meeting last year
NTPC chairman and managing director T. Sankaralingam (left) had articulated the company’s focus on securing fuel supplies during its annual general meeting last year
Updated: Sat, Aug 18 2007. 01 54 AM IST
NTPC Ltd, India’s largest power generation company, has moved a step closer to securing long- term gas supplies for its power plants, with a team of officials leaving for Nigeria to finalize a contract for the supply of 3 millon tonnes per annum.
“There has been a delay as the government has changed in Nigeria. We hope to finalize the terms and conditions of the deal at the end of this visit. We had signed the memorandum of understanding with them on 22 May,” said a senior NTPC executive who did not wish to be identified.
NTPC chairman and managing director T. Sankaralingam (left) had articulated the company’s focus on securing fuel supplies during its annual general meeting last year
Once operational, the gas supply contract with Nigeria would help NTPC establish itself as an integrated player in the power sector.
Further, the Nigerian block will enable the power generation major to procure gas at $3-4 (Rs125-166) per million British thermal unit (mBtu) after investments in gas blocks, liquefaction, regasification and shipping. The company presently pays the spot price of $8-10 per mBtu in the international market.
In return for the gas block, NTPC will set up a 700MWgas-based power plant and a 500MW coal-based plant in the African country and also renovate a 200MW unit at the 1,320MW plant at Egbin. In addition, it will train 30 Nigerian engineers and set up a training institute for engineers in the country.
The supply of liquefied natural gas (LNG) from Nigeria, may require an estimated investment of $1.7 billion. This would include building an LNG liquefaction terminal in Nigeria and setting up a re-gasification terminal in India.
Denying that a change in guard would alter the deal, the NTPC executive added, “Even with the government changing there, no fresh negotiations will be required. A definite agreement will now be signed. The gas block will be offeredto us first, post which we will be setting up the projects in Nigeria.”
NTPC’s focus on securing fuel supplies was articulated last year, during its annual general meeting, by T. Sankaralingam, chairman and managing director. “Acquisition of oil and gas exploration blocks will further strengthen the fuel security and economics of the operations,” he had said then.
Abhishek Puri, an analyst with ASK Securities, said, “Operational, financial and executional are the three types of risks associated with any power business. By securing the gas supply, NTPC will minimise its operational risk.”
NTPC has seven power plants fuelled by gas or liquid fuel with a total capacity of 3,955MW; it also runs a 740MW gas-based plant under a joint venture.
Securing gas supplies would help NTPC as its gas-based projects are currently operating at lower levels of utilization and efficiency because of unavailability of the fuel.
“Getting the gas block will immensely help our gas power projects in the country, which are running at low efficiency,” the executive said.
On the domestic front, the company is also planning to participate in the much delayed seventh round of New Exploration Licensing Policy, to be announced in November.
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First Published: Sat, Aug 18 2007. 01 54 AM IST