Mahagenco holds off on â€کterm sheet' for Reliance gas

Vol 11, PW 6 (26 Jul 07) Midstream & Downstream

Mahagenco has put on hold efforts to sign a â€کterm sheet’ with Reliance for D-6 gas until the Mumbai High Court delivers a final ruling on a supply dispute between the Ambani brothers.

“It makes no sense to sign a â€کterm sheet’ now,â€‌ Mahagenco tells us. Mahagenco was one of several companies that in May this year bid to buy D-6 gas from Reliance’s East to West pipeline to meet its shortfall at Uran.

However, no term sheet was signed for Mahagenco’s request for 1m cm/d pending resolution of some outstanding issues between the two companies. Mahagenco tells us these issues have been resolved but that the term sheet has not been signed because the Mumbai High Court has barred Mukesh Ambani-owned Reliance from contracting D-6 gas to any company other than Anil Ambani owned-Reliance and NTPC.

Mahagenco’s Uran plant needs 4.38m cm/d at 90% Plant Load Factor and suffers an almost constant shortfall of 50%. Mahagenco desperately needs gas.

As of now, it receives only 2.5m cm/d subsidised domestic natural gas at Uran from Mumbai High, even though it has a contract with GAIL for 3.5m cm/d. “We’ve been getting only 2.5m cm/d since the past two years,â€‌ says Mahagenco.

But, chastened by past experience, it is reluctant to float a tender, despite new pipeline connectivity with Gujarat. In 2004, Mahagenco floated a tender for 13m cm/d to be supplied over 15 years: 5m cm/d for its proposed Uran power station expansion project; 1m cm/d to meet the existing shortfall; and 7m cm/d for a new 1400-MW power station planned at Talegaon.

GAIL, Bharat Petroleum and GSPC all expressed interest, “but nobody offered supplies.â€‌ The tender was periodically extended but was withdrawn last year.

“It made no sense to keep it open when nobody was quoting supplies,â€‌ we hear. “Prices were so high and there was no pipeline connectivity.