Gas price 'pooling' could be here by April 2014

Vol 16, PW 13 (24 Jan 13) People & Policy

India’s power ministry wants to begin pooling cheap domestic gas with expensive R-LNG by April 2014 so gas-fired power stations can run at 50%-PLF.

PETROWATCH learns the power ministry prepared a note on gas price pooling on January 16, which it wants to send to the PMO before the end of the month. “We want to set up gas price pooling before many of the current D6 gas supply and transportation contracts end,” explains a power ministry source.

He adds that 40 of the 53 present D6 gas contracts end by April 2014. Under gas pooling, the price of the 29m cm/d of domestic gas available to the power sector will be averaged with 35m cm/d of imported R-LNG to give an electricity generation cost of Rs5.5/unit.

This should ensure most gas-fired stations can run at a minimum 50%-PLF, generating enough income to cover their costs. At anything under 50%-PLF, a station becomes a ‘non-performing asset.

’ Yet since November 2012 the scarcity of domestic gas has meant India’s 15,144-MW of established gas-fired power capacity is running at a dismal 40%-PLF on average. Worse the power ministry estimates that by March 2013 the average PLF will drop to 35%.

Another 8770-MW of gas-fired electricity generation capacity is ready for commissioning or under-construction. Add this upcoming 8770-MW to the established 15,144-MW and the average PLF in India will fall to an abysmal 23%.

Under gas price pooling, power stations will be required to sign Power Purchase Agreements (PPAs) at up to 50%-PLF only with state electricity distribution companies for Rs5.5 to Rs6/unit.