Ahmedabad: A shortage of natural gas in India has reduced efficiency at existing power plants using the fuel and put in jeopardy investment of at least rs 35,000 crore in new projects.
Plant load factor—a key measure of efficiency at electricity generating units—of gas-fired projects declined to 57.93% in September compared with 67.16% in April.
Falling short: Essar Energy’s Vadinar refinery. The supply of natural gas in the country stands at 160 mscmd, against demand of 220 mscmd.
The supply of natural gas in the country, including imported fuel, stands at 160 million standard cu. m per day (mscmd), against demand of 220 mscmd, according to a report by Nomura Equity Research.
India has a power generation capacity of 182,344 megawatts (MW), of which 9.7%, or 17,742.85MW, is gas-based.
Some utilities that were expected to commission new gas-fired plants have put such plans on hold due to the shortage in assured supply of the fuel.
Hyderabad-based Lanco Group has been unable to commission its 740MW power plant at Vijaywada in Andhra Pradesh because of the non-availability of gas. “We have invested close to Rs 2,600 crore and the plant is ready for commissioning from the last two months,” a company official said, requesting anonymity. “We have not been able to sign a power purchase agreement as there is no assured fuel supply from the government despite several representations.”
Adani Power Ltd, which planned to build a 2,000MW gas-based power project in Kutch, Gujarat, has not moved forward on it, an executive said on condition of anonymity.
An official spokesperson of the Adani Group declined comment.
Similarly, the 702MW Pipavav gas power project of Gujarat State Petroleum Corporation, scheduled for commissioning later this month, has put it in a “wait-and-watch” mode, according to D.J. Pandian, principal secretary, energy, in the Gujarat government.
Essar Energy Plc has two gas-fired turbines of 110MW each at its Vadinar refinery in Gujarat meant for captive use that have been lying idle for the past few months. A company spokesperson said they were meant for future expansion and will be utilized when the need arises. He declined to disclose the source of gas required to run the turbines.
An Essar official close to the development said the non-availability of gas and the high price of liquified natural gas (LNG) have made the company even weigh the option of selling the turbines. He refused to be named.
The current production of natural gas cannot meet the requirements of the upcoming 8,000-10,000MW gas-fired power generation plants, which have an investment value of Rs 35,000-40,000 crore and are expected to come on stream over the next few months, rating company Crisil Ltd said in a report released on 14 November.
A Union power ministry official admitted the situation was grave and that the Prime Minister’s Office had been informed of the matter.
“Since there is no domestic gas, there is not much we can do,” said another power minister official. Both declined to be named.
To compound matters, LNG prices have spiked because of a surge in demand from India, China and Japan.
“Japan in particular is seeking to replace nuclear power with more gas-fired generation,” rating agency Fitch Inc. said in a recent report. “China and India are increasing LNG imports and relatively few new LNG producers are due to come on stream in the short term.”
So it comes as no surprise that no new natural gas-based capacity is being planned in the country. The initial excitement after Reliance Industries Ltd’s production from the offshore D6 block in the Krishna-Godavari basin, India’s largest gas reservoir, has ebbed because of falling production from that field.
“Power producers will now have to explore a mix of domestic gas and LNG to stay afloat,” Crisil’s report said.
Given the gas shortage in India, a majority of the 100,000MW capacity planned to be added during the 12th Plan period (2012-17) will be coal-based. Coal production has also been unable to keep pace with demand.
Inadequate electricity generation can hurt growth in India, the world’s second fastest growing major economy. The country’s power sector, already struggling to meet demand, faces some difficult years ahead with electricity requirement expected to soar by 55.5% by the end of March 2017. Demand is expected to increase from the current 900 billion units (BU) to 1,400 BU by March 2017.