GAIL to swap Reliance gas with imported LNG

In a bid to end fuel woes of power plants in Andhra Pradesh, state-owned gas utility GAIL India will supply gas to the electricity generating units by swaping Reliance Industries' (RIL) KG-D6 gas with LNG imported.

In a complex swapping arrangement, GAIL will divert 2.594 million cubic meters per day (mmscmd) of natural gas from RIL's eastern offshore KG-D6 fields that is currently being supplied to consumers in western and northern India, to power plants in Andhra Pradesh, officials said.

The consumers whose KG-D6 gas allocation would be cut, will be supplied imported LNG (liquefied natural gas) but at $4.205 per million British thermal unit (mmBtu), the price at which they currently get Reliance gas.

Officials said Andhra power plants would pay the actual imported cost of LNG, which may be over $10 per mmBtu.

GAIL currently sells rich-gas - gas containing LPG - sourced from domestic fields and imported LNG to industries. This is considered an economic waste as the user industries burn the fuel without extracting LPG.

The company now wants to first extract LPG at its LPG extraction plants and then sell the gas to industries, they said adding the process would lead to at least 5% shrinkage in volume.

This shrinkage in volume is being made up by allocation of 2.594 mmscmd from RIL's Bay of Bengal fields.

GAIL will divert this 2.594 mmscmd of allocation to power plants in Andhra Pradesh and an equivalent volumes would be sold to consumers in west and north, they added.

KG-D6 gas is currently transported from Kakinada on the Andhra coast through a 1,395-km long pipeline to Barunch in Gujarat and then through Hazira-Vijaipur-Jagdishpur and Dahej-Vijaipur pipeline to consumers.

Officials said customers in Andhra Pradesh will enter into contracts for purchase of regassified-LNG from the LNG terminals at Dahej or Hazira in Gujarat. These consumers will pay the cost of RLNG and the marketing margin.

RIL currently produces about 51 mmscmd of gas from the KG-D6 fields. Of this, 14 mmscmd of gas is sold to fertiliser plants, 24 mmscmd to power plants and the remaining 13 mmscmd to other sectors like sponge iron plants, LPG, city gas distribution (CGD), petrochemical plants and refineries.