Reliance may supply LNG to Dabhol power plant

Reliance may supply LNG to Dabhol power plant

New Delhi: Reliance Industries may supply natural gas from its eastern offshore KG-D6 fields to the beleaguered Dabhol power plant in Maharashtra as imported LNG was proving costlier for the nation’s biggest gas-fired plant.

Dabhol at present gets about 5.4 million standard cubic meters of imported gas for two of its three units at $4.98 per million British thermal unit.

Petronet LNG imports 1.5 million tonne a year of liquefied natural gas 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 $4.98 per mmBtu.

“The $8.5 mmBtu price is valid till December and is bound to increase by at least 50% from January. Also the rates of long-term LNG will rise by 25% to $3.12 per mmBtu in 2009. So even after averaging out these two prices, the rates will be too high," an official said.

“As an alternate, it is being considered that KG-D6 gas be sold to Dabhol," he said.

But NTPC, part owner of the company that now runs the Dabhol power plant, had previously opposed buying gas from Reliance as it was fighting a court case against the Mukesh Ambani-led firm on non-performance of a 2004 contract.

“Even before the latest consideration came up, Reliance had last year offered to meet the entire 8.33 mmscmd demand of the three units of Dabhol at $4.2 per mmBtu but NTPC had refused the offer," the official said.

NTPC had stated that it cannot buy any gas from Mukesh Ambani firm untill the issue of non-supply of 12 mmscmd gas by Reliance against a 2004 tender is settled.

Interestingly, Power Ministry has proposed that of the 18 mmscmd gas allocated for the power sector from KG-D6, 7 mmscmd should go to NTPC, throwing NTPC’s argument in its face.

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 Reliance 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.