Centre to consider gas pooling demands

Investments worth Rs 36,000 cr in new capacity at risk because of lack of natural gas availability in power sector

Petroleum and Natural Gas Minister M Veerappa Moily has said the Centre would consider power producers’ suggestions for pooling domestic and imported gas for power and fertilisers. It would also look into the appointment of GAIL as pool administrator.

According to a PTI report, Moily also said he will move a note for the consideration of high powered ministerial group to change priority of allocation of the fuel.

Unavailability of natural gas for the power sector has put at risk new-capacity investments worth Rs 36,000 crore, including Rs 25,000 crore of bank finance.

Today, representatives of the Association of Power Producers (APP)— including Reliance Group Chairman Anil Ambani, Lanco chief Madhusudhan Rao, GVK Group Chairman G V K Reddy and GMR’s G M Rao — met Moily. “They demanded the formation of a common gas price pool for core sectors such as power and fertilisers, augmenting the domestic supply by diverting six million standard cubic metres per day (mscmd) of gas being supplied to the non-core sector and reserving the new finds of 10 mscmd for the power sector. I will raise their concerns with the empowered group of ministers (EGoM),” Moily said.

Earlier, the EGoM had said fertilisers and liquefied petroleum gas were priority segments for KG-D6 gas, as production dropped to an all-time low this month and supply to 25 power plants stopped.

APP has demanded the pool be supplemented by LNG. It has also sought the adoption of price pooling and the appointment of GAIL as administrator and operator.

The supply of KG-D6 gas to the power sector has been cut due to production falling to 17 mscmd, against the planned 80 mscmd. Due to this, the supply to existing 15,000 Mw of gas-based power plants was less than 30 per cent of the plant load factor (PLF). Planned projects in the 11th Plan, with combined a capacity of about 8,700 Mw, are stuck, owing to low supply of domestic gas.

APP said any price arbitrage advantage through the use of a mix of domestic gas and liquefied natural gas (LNG) was possible only by increasing the domestic base. “The 73 mscmd of domestic gas can be pooled with 39 mscmd to meet the requirement of the fertiliser sector and the base load power at 50 per cent PLF,” APP stated in its proposal to the ministry. The proposed pooling model is in the ratio of 65:35. For 39 mscmd of LNG, terminal capacity of 10 million tonnes is required.

“This will result in pooled pricing of less than $12 million metric British thermal units and power rates of less than Rs 6/kilo watt hour at 50 per cent PLF on gas-based plants,” APP said.