RIL-BP to supply gas to Andhra power projects

Entering another important segment of the natural gas business, Ltd and are in talks with gas-starved power projects of Andhra Pradesh to supply long-term liquefied natural gas (LNG).

(IGS), the equal joint venture between the two companies, is looking to sell to five power producers in Andhra Pradesh — GMR, GVK, Lanco Infratech, and Konaseema Gas — and would give them term sheets in the next few days.

BP, industry experts say, will source gas from the global liquefaction projects it has stake in, including Australia’s North West Shelf, Abu Dhabi’s ADGAS, Indonesia's Bontang and Atlantic LNG of Trinidad & Tobago. IGS is known to have quoted a price of $9.5 per mBtu for LNG, which could go up to $10.63 ex-regassification. This would be more than twice the price it sells gas from its KG-D6 block at $4.32 per mBtu.

Andhra Pradesh has been facing severe power shortage and has recently called for bids for short-term power supply. The tariffs that have been quoted are upwards of Rs 4.30 paise, indicating support for more expensive LNG. “In the medium term, Rs 4.50 per unit would be an acceptable tariff in Andhra Pradesh. At these tariffs, power producers can find support at a landed cost of $10-11 per mBtu,” said Debashish Mishra, senior director of Deloitte Touche Tomatsu.

Gas production has been falling in the last two years, depriving many gas-based power plants set up in the belt of a fuel source. The alternative source, spot LNG, would work out very expensive for the companies. Currently, the spot price of LNG is $17-18 per mBtu. The deal offered by IGS might work out, according to experts. “It is better to run a plant to an extent with expensive LNG rather than shutting it down or leaving it stranded,” said an industry expert.

Many gas-based power plants have been running at lower than 40 per cent capacity utilisation, affecting the earnings of some of the companies. GVK, for example, saw a 29 per cent drop in revenue from its three gas projects in the quarter ended June 2012. GMR, too, posted a Rs 27-crore loss in profit after tax before minority in its energy segment. “It is mainly due to lower gas availability in Kakinada and Vemagiri (gas-based power) plants,” the company said. Lanco Infratech’s second unit at Kondapalli has also suffered due to a reduction in gas supply from Reliance’s KG basin.

An email sent to Reliance Industries remained unanswered. Questionnaires sent to the power on the development also did not evoke any response.

RIL has been in talks to book capacity at Shell Hazira Gas Private Ltd, a joint venture between Anglo-Dutch energy company Shell and France’s Total, and Petronet LNG’s Dahej terminal. “We are in talks with various LNG terminal operators to book exclusive capacity at the existing LNG terminals. We want to get capacity and bring gas to market. We would pay them toll charges,” an RIL executive had earlier told Business Standard.

India currently has two LNG terminals, both in Gujarat, that have been bringing in LNG from across the world. Though Shell has been offering capacity at the terminal on a merchant basis, PLL promoters so far market regasified LNG themselves.

image
Business Standard
177 22
Business Standard

RIL-BP to supply gas to Andhra power projects

Kalpana Pathak & Katya B Naidu  |  Mumbai 



Entering another important segment of the natural gas business, Ltd and are in talks with gas-starved power projects of Andhra Pradesh to supply long-term liquefied natural gas (LNG).

(IGS), the equal joint venture between the two companies, is looking to sell to five power producers in Andhra Pradesh — GMR, GVK, Lanco Infratech, and Konaseema Gas — and would give them term sheets in the next few days.

BP, industry experts say, will source gas from the global liquefaction projects it has stake in, including Australia’s North West Shelf, Abu Dhabi’s ADGAS, Indonesia's Bontang and Atlantic LNG of Trinidad & Tobago. IGS is known to have quoted a price of $9.5 per mBtu for LNG, which could go up to $10.63 ex-regassification. This would be more than twice the price it sells gas from its KG-D6 block at $4.32 per mBtu.

Andhra Pradesh has been facing severe power shortage and has recently called for bids for short-term power supply. The tariffs that have been quoted are upwards of Rs 4.30 paise, indicating support for more expensive LNG. “In the medium term, Rs 4.50 per unit would be an acceptable tariff in Andhra Pradesh. At these tariffs, power producers can find support at a landed cost of $10-11 per mBtu,” said Debashish Mishra, senior director of Deloitte Touche Tomatsu.

Gas production has been falling in the last two years, depriving many gas-based power plants set up in the belt of a fuel source. The alternative source, spot LNG, would work out very expensive for the companies. Currently, the spot price of LNG is $17-18 per mBtu. The deal offered by IGS might work out, according to experts. “It is better to run a plant to an extent with expensive LNG rather than shutting it down or leaving it stranded,” said an industry expert.

Many gas-based power plants have been running at lower than 40 per cent capacity utilisation, affecting the earnings of some of the companies. GVK, for example, saw a 29 per cent drop in revenue from its three gas projects in the quarter ended June 2012. GMR, too, posted a Rs 27-crore loss in profit after tax before minority in its energy segment. “It is mainly due to lower gas availability in Kakinada and Vemagiri (gas-based power) plants,” the company said. Lanco Infratech’s second unit at Kondapalli has also suffered due to a reduction in gas supply from Reliance’s KG basin.

An email sent to Reliance Industries remained unanswered. Questionnaires sent to the power on the development also did not evoke any response.

RIL has been in talks to book capacity at Shell Hazira Gas Private Ltd, a joint venture between Anglo-Dutch energy company Shell and France’s Total, and Petronet LNG’s Dahej terminal. “We are in talks with various LNG terminal operators to book exclusive capacity at the existing LNG terminals. We want to get capacity and bring gas to market. We would pay them toll charges,” an RIL executive had earlier told Business Standard.

India currently has two LNG terminals, both in Gujarat, that have been bringing in LNG from across the world. Though Shell has been offering capacity at the terminal on a merchant basis, PLL promoters so far market regasified LNG themselves.

RECOMMENDED FOR YOU

RIL-BP to supply gas to Andhra power projects

Entering another important segment of the natural gas business, Reliance Industries Ltd and BP India are in talks with gas-starved power projects of Andhra Pradesh to supply long-term liquefied natural gas (LNG).

Entering another important segment of the natural gas business, Ltd and are in talks with gas-starved power projects of Andhra Pradesh to supply long-term liquefied natural gas (LNG).

(IGS), the equal joint venture between the two companies, is looking to sell to five power producers in Andhra Pradesh — GMR, GVK, Lanco Infratech, and Konaseema Gas — and would give them term sheets in the next few days.

BP, industry experts say, will source gas from the global liquefaction projects it has stake in, including Australia’s North West Shelf, Abu Dhabi’s ADGAS, Indonesia's Bontang and Atlantic LNG of Trinidad & Tobago. IGS is known to have quoted a price of $9.5 per mBtu for LNG, which could go up to $10.63 ex-regassification. This would be more than twice the price it sells gas from its KG-D6 block at $4.32 per mBtu.

Andhra Pradesh has been facing severe power shortage and has recently called for bids for short-term power supply. The tariffs that have been quoted are upwards of Rs 4.30 paise, indicating support for more expensive LNG. “In the medium term, Rs 4.50 per unit would be an acceptable tariff in Andhra Pradesh. At these tariffs, power producers can find support at a landed cost of $10-11 per mBtu,” said Debashish Mishra, senior director of Deloitte Touche Tomatsu.

Gas production has been falling in the last two years, depriving many gas-based power plants set up in the belt of a fuel source. The alternative source, spot LNG, would work out very expensive for the companies. Currently, the spot price of LNG is $17-18 per mBtu. The deal offered by IGS might work out, according to experts. “It is better to run a plant to an extent with expensive LNG rather than shutting it down or leaving it stranded,” said an industry expert.

Many gas-based power plants have been running at lower than 40 per cent capacity utilisation, affecting the earnings of some of the companies. GVK, for example, saw a 29 per cent drop in revenue from its three gas projects in the quarter ended June 2012. GMR, too, posted a Rs 27-crore loss in profit after tax before minority in its energy segment. “It is mainly due to lower gas availability in Kakinada and Vemagiri (gas-based power) plants,” the company said. Lanco Infratech’s second unit at Kondapalli has also suffered due to a reduction in gas supply from Reliance’s KG basin.

An email sent to Reliance Industries remained unanswered. Questionnaires sent to the power on the development also did not evoke any response.

RIL has been in talks to book capacity at Shell Hazira Gas Private Ltd, a joint venture between Anglo-Dutch energy company Shell and France’s Total, and Petronet LNG’s Dahej terminal. “We are in talks with various LNG terminal operators to book exclusive capacity at the existing LNG terminals. We want to get capacity and bring gas to market. We would pay them toll charges,” an RIL executive had earlier told Business Standard.

India currently has two LNG terminals, both in Gujarat, that have been bringing in LNG from across the world. Though Shell has been offering capacity at the terminal on a merchant basis, PLL promoters so far market regasified LNG themselves.

image
Business Standard
177 22
Widgets Magazine

More News

  • Star TV Advertisers pay IPL-like rates for India-West Indies T20
  • We focused on creating value, not valuation: Bhavin Turakhia We focused on creating value, not valuation: Bhavin Turakhia
Widgets Magazine
Widgets Magazine

Upgrade To Premium Services

Welcome User

Business Standard is happy to inform you of the launch of "Business Standard Premium Services"

As a premium subscriber you get an across device unfettered access to a range of services which include:

  • Access Exclusive content - articles, features & opinion pieces
  • Weekly Industry/Genre specific newsletters - Choose multiple industries/genres
  • Access to 17 plus years of content archives
  • Set Stock price alerts for your portfolio and watch list and get them delivered to your e-mail box
  • End of day news alerts on 5 companies (via email)
  • NEW: Get seamless access to WSJ.com at a great price. No additional sign-up required.
 

Premium Services

In Partnership with

 

Dear Guest,

 

Welcome to the premium services of Business Standard brought to you courtesy FIS.
Kindly visit the Manage my subscription page to discover the benefits of this programme.

Enjoy Reading!
Team Business Standard