Essar needs R-LNG for its two power stations

Vol 19, PW 23 (28 Jul 16) Midstream & Downstream

Essar is planning to revive two gas-fired power stations now that LNG prices have fallen and has dumped plans to convert them by using coal.

PETROWATCH learns Essar is talking to several gas suppliers as it expects its gas needs to increase dramatically from 3.5m cm/d at present to over 9m cm/d, once it brings its 515-MW Hazira power station in south Gujarat and 500-MW Bhander power station, also located in Hazira, back onstream by end-2016. Essar shut both power stations three years ago after making a grand announcement on June 24, 2013 that it planned to convert both of them to coal use by 2016 for $200m.

At the time, Essar argued generating power from coal was far cheaper than R-LNG. The cost of generating a unit of electricity using R-LNG back then was Rs9.42 ($0.15) against Rs3.26/unit ($0.05) using domestic gas and the cost using coal was even cheaper.

"In the past we have paid prices as high as $24/mmbtu and $18/mmbtu for R-LNG," says a senior Essar source. "But now LNG prices have dropped worldwide by more than half, we can produce power at competitive rates by using R-LNG." Essar currently takes gas from GAIL, GSPC, IndianOil and Bharat Petroleum for its 405,000 b/d Vadinar refinery and its Hazira steel mill where since early this year it has gradually ramped up capacity to 5m t/y from just 1.5m t/y with a view to hitting 6.8m t/y capacity.