‘Power PSU stands to lose Rs 15,000 crore if it imports LNG’
Reliance Industries Ltd (RIL) has complained to the power ministry about NTPC’s reluctance to sign an agreement to buy gas from it and has said the power PSU stands to lose Rs 15,000 crore if it imports LNG.
The government had allocated 2.67 million metric standard cubic metres per day (mmscmd) of gas from RIL’s eastern offshore KG-D6 fields to NTPC, but unlike the 35 other customers identified for the gas, the state-run firm is yet to sign a Gas Sales and Purchase Agreement (GSPA).
“In our last meeting with NTPC on August 12, all issues relating to finalisation of GSPA were resolved and NTPC was to revert after obtaining internal approvals. However, we are still awaiting a formal response from NTPC in spite of a regular follow-up,” RIL Executive Director P M S Prasad wrote to Power Secretary H S Brahma on August 31.
RIL had agreed to sign the GSPA with the caveat that the agreements would be “without prejudice” to the outcome of the case in Bombay High Court over a 2004 tender where the Mukesh Ambani firm had quoted $2.34 per mBtu as price for gas to be supplied to NTPC’s Kawas and Gandhar plants, he said.
Instead, NTPC has signed-up to buy 2.5 mmscmd of LNG for 10 years from overseas market and the delivered cost of this would be $11.2 per mBtu as compared to KG-D6 burner tip cost of $6.5 per mBtu, leading to a loss of Rs 600 crore per annum. Besides, NTPC buys 3-4 mmscmd LNG on spot basis, resulting in additional outgo of Rs 900 crore per annum.
RIL’s KG-D6 fields can today produce more than 60 mmscmd but the company is forced to cap output at 36-37 mmscmd as customers like NTPC have not started taking their quota.
“... It is indeed strange that NTPC does not want to discuss the GSPA for the existing Kawas and Gandhar plants even through the ongoing litigation relates to the proposed expansion of Kawas and Gandhar plants. RIL, therefore, finds this stance of NTPC quite incomprehensible,” Prasad wrote.
He rebutted NTPC’s claims that the $4.20 per mBtu price for KG-D6 gas (delivered price of $6.54 after adding taxes and transportation) would result in increase in cost of power, saying the difference between $4.2 per mBtu and $2.34 per mBtu rates “actually results in an increase in the cost of power by not more than 60 paise per unit”.
“Moreover, NTPC remains unaffected by any change in price of fuel because the cost of fuel is passed on by NTPC to the state electricity boards,” he wrote. “If NTPC buys gas from KG-D6, it would actually result in significant reduction in cost of power purchased by the SEBs from NTPC compared to the cost at which the SEBs are today being forced to buy power from NTPC.”
The average cost of power by NTPC to SEBs in 2008-09 from its Kawas and Gandhar plants was Rs 6.34 per unit and Rs 4.64 per unit, respectively, implying the average cost of fuel purchased by NTPC was $16 per mBtu and $11 per mBtu, respectively.