Gas-starved Lanco desperate for PY-1 supplies

Vol 16, PW 24 (27 Jun 13) Midstream & Downstream

It's a measure of how desperate Indian gas consumers are that power producer Lanco Infratech is begging for a paltry 8000 cm/d from the HOEC-operated PY-1 gasfield offshore Tamil Nadu.

Lanco wrote to the oil ministry on June 4 requesting it to direct GAIL to sell PY-1 gas (if and when available) to meet a shortfall at its 120-MW power station at Karuppur village in the Thiruvidaimaruthur area of Tanjore in Tamil Nadu. “We have signed a separate contract with GAIL to buy 500,000 cm/d from ONGC,” Lanco tells us.

“But actual gas from GAIL is only 65% or around 350,000 cm/d of the contracted quantity. That is why we need PY-1 gas.

” GAIL, he adds, cannot find gas for the Tanjore power station from anywhere else. But can Lanco secure PY-1 gas when GAIL has already contracted it to PPN Power for its 330-MW combined cycle power station in Tamil Nadu's Nagapattinam district Lanco thinks yes, arguing PPN is taking less gas over the past three years because its power station is running at 40% capacity.

"HOEC has no option but to close wells or flare gas,” reads Lanco’s June 4 letter to the ministry. “This is a waste.

” In private HOEC is telling Lanco it is ready to sell PY-1 gas but is bound by its PPN contract. BSE-listed HOEC operates 75-sq km PY-1 with 100%.

A PSC was signed in October 1995 and the PML on August 6, 2002. Note: "HOEC's minimum gas supply and offtake clause in its agreement with PPN prevents it from selling us gas," adds Lanco.

"We're in touch with them and hope a clearer picture will emerge." PY-1 gas production hit a peak of 1.3m cm/d in August 2011 then fell to 90,000 cm/d in December 2011 before falling again to current levels of 8000 cm/d.

“There is a problem with the wells,” says a DGH source. “That is why production is so low.

” Lanco adds it will take whatever gas it can get. "We keep hearing gas supplies to Tamil Nadu will increase in five years,” says Lanco.

“But we can’t wait five years.”