GSPC tests pricing for Deen Dayal West gas

Vol 16, PW 16 (07 Mar 13) Midstream & Downstream

Dozens of gas-starved companies will participate next week in GSPC's first 'e-auction' for 5.24m cm/d expected from its Deen Dayal West (DDW) field from July.

GSPC invited EoIs on February 5 from urea factories, LPG manufacturers, power producers and CGD players. Companies must send in EoIs by March 12.

But will they pay GSPC's asking price of between $8.50/mmbtu to $14.20/mmbtu “I think GSPC’s price expectations will be met," says a power sector source. "Spot R-LNG prices are over $17/mmbtu and may rise further.

Most companies who bid for DDW gas have no choice." An Essar Power source agrees power producers must accept whatever is on offer.

"Unlike spot LNG if we get DDW gas we get it at an assured price for 20 years," adds a source at KRIBHCO. GSPC wants a price linked to 12.65% of the Brent crude benchmark plus a premium of $0.26/mmbtu, provided the Brent price is between $65/barrel ‘floor’ and $110/barrel ‘ceiling’.

"Based on this we expect a gas price of $8.50 to $14.20/mmbtu," says GSPC. Bidders must also pay VAT, ranging from 0% to 26% in different states, plus distance-based gas transportation tariff of Rs15/mmbtu ($0.27) to Rs58.75/mmbtu ($1.07), not to mention a GSPC marketing margin of Rs10.21/mmbtu ($0.18).

GSPC can rest assured there's no shortage of demand. Gujarat energy minister Saurabh Patel told the state assembly on March 5 that Gujarat State Energy Corporation (GSEC) has 700-MW sitting idle: 2.25m cm/d R-LNG is needed for its 510-MW Utran station and for its 219-MW Dhuvaran station.