All new gas-fired power stations must use R-LNG

Vol 15, PW 18 (22 Mar 12) Midstream & Downstream

Anil Ambani’s 1067-MW power station at Samalkot in Andhra Pradesh is just one of several that might be forced to buy expensive spot R-LNG until the power ministry clears a proposal to ‘pool’ the power sector’s domestic gas and R-LNG allocations.

PETROWATCH learns PMO principal secretary Pulok Chatterjee held a post-lunch meeting on March 16 to discuss ‘gas pooling’ with the power and oil secretaries. At a similar meeting on March 6 the PMO directed the power ministry to decide how it wants to implement a proposed uniform gas pricing regime.

Power secretary Uma Shankar replied that it makes no sense for the government to make allocations to new gas-fired stations, as domestic supplies are scarce. Such a move, he said, would deprive established power projects of access to gas.

Better instead to encourage new gas-fired stations, ready for commissioning, to turn to spot R-LNG. These power projects could sell electricity at market rates to power distribution companies.

Shankar’s view, if implemented, is bad news for three new power projects that will be forced to use R-LNG for commissioning: · GMR’s 768-MW Vemagiri station · Lanco Infratech’s 770-MW Kondapalli station · Sravanthi Energy’s 450-MW Kashipur station India’s high-priority power sector has a total gas allocation of 52.61m cm/d, of which 21m cm/d is D6 gas sold at $4.20/mmbtu; 24m cm/d is APM (subsidised) gas; and about 7m cm/d is R-LNG. No new domestic gas supplies are expected to be added to the mix until 2015.

Yet power ministry officials believe gas price pooling proposals are not the answer, as these have additional financial implications like ‘gas pool administration charges’ or ‘additional marketing margins’ for GAIL, the pool administrator. More, such proposals also create contractual and legal problems over ‘take or pay’; ‘ship or pay’; and daily ‘nominations and schedules’.