Gas shortage forces GVK stations to run at 50%

Vol 15, PW 13 (12 Jan 12) Midstream & Downstream

GVK Power is being forced to operate its two gas-fired power stations in Andhra Pradesh at 50% capacity because of scarce domestic gas supplies.

PETROWATCH learns Hyderabad-based GVK is receiving only 500,000 cm/d of APM or subsidised gas from ONGC at its 479-MW gas-fired Jegurupadu station, against its original APM allocation of 800,000 cm/d. GVK is also receiving only 500,000 cm/d of gas at Jegurupadu from Mukesh Ambani-controlled Reliance’s D6 block, despite an allocation of 1m cm/d for the station by the specially constituted Empowered Group of Ministers back in April 2009.

“Supplies are erratic but what to do” wonders a company source. “Only the government has the power to ensure we get gas.

Even Mukesh Ambani cannot get D6 gas for his own use without going through the government!” It’s a similar sad story at GVK’s 464-MW Gautami power station located barely 18-km from Kakinada city, near the D6 landfall point at Gadimoga village. “We were allocated 1m cm/d of D6 gas for Gautami,” we hear.

“But we are receiving just about half of that and can only generate about 230-MW of electricity.” GVK has ruled out using expensive R-LNG and says it has no choice but to wait anxiously for D6 gas supplies to improve.

“It costs just Rs2/kw ($0.04) to generate electricity using D6 gas,” we are told. “But this will increase to over Rs10/kw ($0.19) if we use R-LNG.

Nobody will buy electricity from us at that price!” GVK also dismisses market rumours that it might soon shift its focus away from gas-based power, following its acquisition of a 79% stake in Queensland-based coalminer Hancock Prospecting Pty for $1.26bn last September (2011). The acquisition of Hancock has given GVK access to up to 3.3bn tonnes of coal reserves.