New Delhi: Fuel-starved NTPC Ltd, India’s largest power generation company, is exploring tie-ups with oil and gas companies that have a presence in India as part of its strategy to secure gas supplies for its power projects.
NTPC has been nudged into this initiative following an advisory from the Union government and after the company failed to secure long-term gas supply contracts, which has led to the plants operating at lower capacities and efficiency levels.
“We are planning on this course of action of forming joint ventures (JVs) with companies having access to hydrocarbon resources. There are two models that we have in mind. We may enter the JV either as an anchor investor/customer or help the JV in securing hydrocarbon resources by setting up power projects in lieu of access to the hydrocarbon resources,” said a senior NTPC executive, who did not wish to be identified.
NTPC, which has cash reserves of around Rs12,000 crore, is seeking supplies for its seven plants fuelled by gas or liquid fuel with a total capacity of 3,955MW, and for its 740MW gas-based plant.
Unable to tie up supplies, NTPC has been forced to use alternative fuel, naphtha, to run its power plants.
“Getting us involved in the JV as anchor customer will make these projects having high capital requirements immensely bankable. We are open to both the models,” the executive added.
The company has planned this line of action as the firm has not been able to secure gas and coal blocks from abroad as reported by Mint on 4 May.
NTPC plans to increase its power generation capacity by 22,596MW to 50,000MW by 2012. Of this, 15,180MW will be through coal-based power generation, 4,550MW through gas-based generation and the balance from hydroelectric power.
The company’s supply of administered price mechanism, or APM, gas has reduced. While the company’s total gas requirement is 17 million cu. m per day (mcmd), it can access only 10.5mcmd.
“This is similar to the strategy followed by the oil marketing and refining companies such as Indian Oil Corp. Ltd, Hindustan Petroleum Corp. Ltd and Bharat Petroleum Corp. Ltd who have been investing in the upstream sector to secure energy supplies and become an integrated player. If this works, it will be very beneficial to NTPC,” said Ravi Mahajan, a partner at audit and consulting firm Ernst & Young.
The company has also not been able to secure liquefied natural gas (LNG) in the spot market due to an increase in international demand, particularly from Japan, on account of the lower nuclear power generation there, resulting in spot prices ranging between $17 and $21 (Rs700-865) per million British thermal unit (mBtu).
“Of our current supplies, only around one mcmd is in the spot market with the balance being APM gas. With gas prices in the spot market at $21 per mBtu, we cannot buy it. Japan has contributed to the shortage,” the NTPC executive quoted earlier said.
The company had a net profit of Rs7,129.30 crore on revenues of Rs37,004.60 crore in 2007-08.