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NTPC eyes stake in Australian gas fields as Nigeria deal falters

NTPC eyes stake in Australian gas fields as Nigeria deal falters
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First Published: Sat, Feb 09 2008. 01 03 AM IST
Updated: Sat, Feb 09 2008. 01 03 AM IST
Frustrated with delays in implementing a deal with Nigeria that would help secure gas supplies, NTPC Ltd is exploring alternatives, such as possibly acquiring an equity stake in a gas field in Australia.
“We have been approached by a major operator of a gas field in Australia. We are interested in the proposal as we have a chronic need of gas and are studying it,” said a senior company executive, who did not wish to be identified. He also declined to name the operator, citing commercial considerations.
Australia contributes 9% to the world production of liquefied natural gas (LNG) andmajor gas field operators there are Royal Dutch Shell Plc., BP Plc., Chevron Corp., and BHP Billiton.
Industry analysts say with the spiralling gas prices, NTPC, India’s largest power generation firm, will have to shell out a huge sum that may be upward of $1 billion (Rs3,960 crore). The company, which has cash reserves of around Rs12,000 crore, hasn’t yet succeeded in its quest for overseas gas assets.
NTPC is desperately seeking supplies for its seven power plants, fuelled by gas or liquid fuel, with a total capacity of 3,955MW; and also the 740MW gas-based plant.
They are all operating at lower levels of capacity utilization and efficiency because of unavailability of fuel. The capacity utilization is 60-65%, while the global average for similar plants is 80-90%.
“There are two models that we have in mind for securing gas supplies; one is what we plan to follow in Nigeria and Yemen, where we would set up power projects in lieu of getting gas blocks. The other model is where we will take an outright stake in a producing gas field as we plan to do in Australia,” the executive said.
The company plans to set up power projects and a training facility in Yemen as reported by Mint on 2 November.
In Nigeria, it is planning to finalize a contract for the gas supply of 3 million tonnes per annum (mtpa) in lieu of setting up a 700MW gas-based power plant and a 500MW coal-based plant there; renovate a 200MW unit at an existing 1,320MW plant and train 30 Nigerian engineers; will start a training institute for engineers there.
But, “the Nigerian government has asked for changes in the original proposal to which we are opposed. A team of ours will be visiting Nigeria shortly to smoothen out the deal,” the executive added.
NTPC has a generation capacity of 27,404MW, which it plans to increase to 50,000MW by 2012. Of the proposed capacity expansion of 22,596MW, coal-based power will account for 15,180MW, while 4,550MW will be gas-based and the balance in hydropower. India has a gas-based generation capacity of 13,691MW. Of 78,577MW that the country aims to add by 2012, some 5.45%, or 4,290MW, will be gas-based.
“Today, there are no dearth of users for gas as there is less supplies. There are more buyers than sellers. From the operator perspective the only thing that may work out to be in favour of NTPC is an assured user over a period of time,” said Ajit C. Kapadia, vice-chairman of the Centre for Fuel Studies and Research and former director of GAIL (India) Ltd. Analysts say this problem will continue, as estimates of the ministry of petroleum and natural gas project the country will need around 180 million standard cubic metre per day (mscmd) of gas in 2007-08, while supplies will be around 81mscmd.
The ministry has projected that the supply-demand mismatch will persist till 2012.
NTPC has been seeking out alternative gas supplies after its Rs40,000-crore contract with Reliance Industries Ltd has been embroiled in a legal battle in the Bombay high court. NTPC officials have insisted that they will not settle out of court. The company also plans to bid for the blocks that have been offered under the seventh round of New Exploration Licensing Policy (Nelp).
The state-owned power utility made the first move in 2005 when it acquired rights to explore a block in Arunachal Pradesh under Nelp-5.
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First Published: Sat, Feb 09 2008. 01 03 AM IST