Some are happy to pay $30/mmbtu for D6 gas

Vol 16, PW 17 (21 Mar 13) Midstream & Downstream

Four Andhra Pradesh power producers are paying the highest ever price for KG-D6 gas under a complicated swap arrangement between GAIL and Reliance.

Under the swap Reliance has been supplying 1m cm/d of D6 gas since March 15 to power stations run by GVK, GMR, Lanco and Konaseema. But these customers are paying R-LNG rates of $30/mmbtu to GAIL for the gas, diverted from GAIL's own D6 gas supplies.

The swap will continue until March 31. Earlier the four power stations were paying only $5.8/mmbtu for D6 gas until supplies stopped on March 3.

AP Transco suggested the gas swap this month (March) writing to GAIL for 1.5m cm/d till end-March to meet additional demand from farmers during summer harvesting. GAIL offered R-LNG from Dabhol and asked Reliance to divert D6 gas from its own LPG allocation to the AP power producers.

Reliance received oil ministry permission for the arrangement. All four power stations are now receiving KG-D6 gas but get billed for R-LNG because on paper GAIL is supplying them R-LNG from Dabhol through Reliance’s East-West pipeline.

The power stations must also pay transportation charges to Reliance Gas Transportation Infrastructure at the same rate they would pay for receiving R-LNG from Dabhol. GAIL is the biggest winner as it is billed $5.8/mmbtu by Reliance for D6 gas but re-sells this gas at $30/mmbtu.

“Nobody checks if GAIL imports LNG to make up for the D6 gas diverted,” says a source. GAIL has a D6 gas allocation of 2.59m cm/d for its LPG facility but actual supplies are only 2m cm/d as production is falling.