Delhi joins Dabhol to benefit from lower R-LNG price

Vol 10, PW 26 (03 May 07) Midstream & Downstream

Dabhol in Maharashtra is not the only power station that will benefit from the government’s decision to pool the price of cheap RasGas R-LNG with more expensive imports in the future.

PETROWATCH learns the 1000-MW power plant at Bawana in northwest Delhi belonging to the Pragati Power Corporation will also benefit. In three years Delhi will host the prestigious Commonwealth Games.

Electricity to power this showpiece event will come mainly from Bawana and frantic efforts are underway to ensure the sort of power cuts that most people in Delhi suffer daily does not disrupt the games. For this Bawana needs more capacity, and cheap R-LNG.

Luckily, it’s likely to get both. Moves are afoot to increase capacity to 1600-MW in time for the games and last October Pragati Power signed a MoU with Petronet-LNG for the supply of 6m cm/d R-LNG.

At first Petronet-LNG wanted to sell this R-LNG direct to Pragati Power at (high) current market rates. But after Delhi’s decision last year to pool term LNG prices, it will now sell at a cheaper rate through GAIL, IOC and BPCL.

Supplies to Pragati Power will start from September 2009, when Petronet-LNG finishes supplying 1.5m t/y to Dabhol. In a letter to Pragati Power on 30th March, Petronet-LNG says: “We would like to reassure you that the precedence set by Petronet-LNG vis-أ -vis R-LNG pricing for Ratnagiri Gas and Power (Dabhol), which had to factor the worst possible dynamics vis-أ -vis global LNG trade, should provide immense comfort to Pragati Power of the likely trend in price when supply commences end-2009.

â€‌ Because of price pooling, continues Petronet-LNG, R-LNG at the Dahej flange should be between $6.5 and $7.5 per mmbtu. Add pipeline charges levied by GAIL, marketing margin and sales tax and R-LNG “could be deliveredâ€‌ to power plants at between $7.25 and $8.25 per mmbtu – a good price, according to Petronet-LNG.

On 13th October 2006 a meeting held by Cabinet Secretary BK Chaturvedi said the delivered price to Bawana would be around $9 per mmbtu.