A landmark gas contract between ONGC and BSES

Vol 3, PW 22 (24 Nov 99) Midstream & Downstream

Look no further than Mumbai for proof that local power companies prefer domestically produced natural gas to expensive naphtha or imported LNG.

On 7th October this year, ONGC, the countrys biggest producer of natural gas, signed an MOU with the Bombay Suburban Electricity Supply (BSES) company for the supply of gas from the Bombay Offshore to fire a proposed 495-MW power plant at Palghar in Maharashtra (http://www.bses.com/option5.html). A spokesman at BSES tells this report that ONGC wants details of the MOU to be kept confidential.

This report, however, learns that gas form ONGC will be sufficient to fire only one of the three turbines planned for the combined cycle naphtha/gas power plant. A source at ONGC said the MOU will be converted into a contract in a month or so, once all the financials are all worked out.

Located in Maharashtra, BSESs Palghar power plant is an obvious customer for supplies of regassified LNG from Enron. But alas: We prefer domestic natural gas because it is cheaper, a spokesman for BSES tells this report.

He is not alone. In India most Independent Power Producers (IPP), given the choice, prefer domestic gas.

The problem is that ONGC does not have enough to go around. Gas for this particular power plant will come from the C22 and C24 gasfields (discovered in August 1987) in the Bombay Offshore, adjacent to the South Tapti gasfield operated by Enron.

A long term gas profile prepared by ONGC predicts combined production of 850,000 cubic metres a day (cm/d) from C22 and C24 will begin in 2001. Worryingly, the profile reports that production will drop steeply to 240,000 cm/d by 2011.

Hence, BSES does not rule out future use of regassified LNG or imported naphtha. We are keeping all options open, learns Petrowatch.