Gas scarcity for power sector expansion

Vol 14, PW 2 (15 Jul 10) People & Policy

Ambitious plans to add up to 25,000-MW of new gas based power generation capacity between 2012 and 2017 have run into a major hurdle.

According to electricity regulator the Central Electricity Authority (CEA), India’s power ministry is worried there might not be enough domestic gas available to fuel the proposed additional generating capacity. “Our biggest problem,” says a source “is that the oil ministry doesn’t know how much domestic gas will be available for the power sector during the 12th (five-year) plan (2012-17).

” These concerns were discussed at a meeting called by the power ministry and attended by oil ministry and DGH officials on June 30. Unofficially, the DGH has told the CEA that up to 40m cm/d of domestic gas could be supplied to the power sector during the 12th five-year plan.

But this is not enough, says the CEA, which believes a staggering 90m cm/d is needed to fuel 25,000-MW new gas-based generating capacity. If domestic gas isn’t the answer, we are told, costly R-LNG will have to make up the shortfall.

“There is no other option,” adds our source. “We must install more gas-based generating capacity.

Liquid fuel has limitations.” CEA officials also support ‘pooling’ or averaging out relatively-expensive LNG prices with cheaper domestic gas for the power sector, as recommended by Spanish consultant Mercados Gas Markets in a report submitted on January 28.

More gas would become available to the market this way at a moderate price, we are told. Spot LNG, however, is not an option, argues the CEA, as prices are too volatile.

Instead, the CEA believes power producers should sign long-term LNG contracts. Contrary to popular belief, India’s largest state-owned power generating company NTPC is not against gas pooling, says the CEA.

NTPC simply wants 60% of its gas demand met by domestic sources, the rest by R-LNG.