Power Firms Start Opting For Lng

Promoters of liquid fuel-based power projects that were initially to run on naphtha have started tying up with companies for supply of liquefied natural gas (LNG) as primary fuel.

The RPG group, promoters of the 700 mw Dholpur project, and Steel Tubes of India, promoters of the 340 mw Guna project, are set to sign contracts with Petronet-LNG for supply of LNG. The two projects are among the largest liquid fuel power projects after Enron's Dabhol project. The promoters have signed memorandums of understanding with Petronet.

As most power project promoters have already signed fuel supply agreements with state-owned oil companies, shifting to Petronet for LNG supply will make the switchover from naphtha to LNG smoother. Promoters are allowed to terminate existing fuel supply agreements in the event of LNG or natural gas becoming available as alternative fuel.

Petronet is a join venture in which Indian Oil Corporation, Gas Authority of India, Hindustan Petroleum Corporation and Bharat Petroleum Corporation will hold the majority stake. The balance will be offered to financial institutions and other strategic investors.

Under the initial liquid fuel policy, naphtha was chosen as primary fuel for power generation. But due the high cost of power and the relative volatility of naphtha, promoters had expressed their intention to shift to LNG when available. Cost of power of LNG-based power projects is expected to be comparable to cost of power of imported coal-based projects.

Sources said Petronet would supply gas to these projects from Dahej in Gujarat where it will set up a 2.5 million tonne LNG terminal by 2002.

LNG will be sourced and transported by Gaz de France up to Dahej and will thereafter be piped to the power projects through the Hazira-Bijapur-Jagdishpur pipeline. Sources said the existing pipeline would require upgradation for carrying gas.