OilMin orders diversion of KG gas to Andhra power plants

For the second time in a year, the Oil Ministry has ordered diversion of natural gas from Reliance Industries' KG-D6 fields to fuel-starved power plants in Andhra Pradesh.

The Ministry on March 2 issued orders that 2.5 million cubic meters per day of gas, which state-owned GAIL India gets from KG-D6 fields, be diverted to Transmission Corp of Andhra Pradesh Ltd, sources privy to the development said.

GAIL, which uses KG-D6 gas for extraction of LPG, will make up for the lost volume through imports (inform of LNG). GAIL will charge APTransco the price of imported liquefied natural gas (LNG) for the diverted 2.5 mmcmd KG-D6.

This the second time the ministry has ordered gas swap to help electricity generation in Andhra Pradesh. A similar exercise was carried out in March last year, when GAIL diverted 2.5 mmcmd gas it got from KG-D6 to Andhra power plants.

The plants will benefit from the swap agreement, and have to pay the actual imported cost of LNG, which may be over $12 per million British thermal unit.

KG-D6 gas is priced at $4.205 per mmBtu.

The ministry in the March 2 order stated that swap would be for a period up to May 31, 2012 and on the same terms and conditions as was done during March-June, 2011.

It directed independent power producers in Andhra Pradesh, GAIL and RIL to enter into "necessary commercial agreements to implement this (swap) arrangement."

RIL currently produces about 35 mmcmd of gas from KG-D6 fields. The currently output comprises of 29.22 mmscmd from the Dhirubhai-1 and 3 gas fields and 6.55 mmcmd from the MA oilfield in the same KG-D6 block.

Of the total output, 14.66 mmcmd of the gas is currently being supplied to fertiliser plants and 18.02 mmscmd to power plants. The remaining 3.09 mmscmd was consumed by other sectors, including compressors and internal use of the East-West pipeline that transports gas from the East Coast to consumption centres in the West.