GAIL India in talks for Dabhol plant

The beleagured $3 billion Dabhol power plant, which is currently generating expensive electricity owing to the use of naphtha, is likely to get liquefied natural gas (LNG) from Algeria from mid-2009.

GAIL India, the 50 per cent owner of the Dabhol power plant, is in talks with an Algerian firm for sourcing long-term LNG to fire the 2,184 Mw power plant, an industry source said.

"The Algerian company has indicated the possibility of supplying of 1.2 million tonne per annum (tpa) LNG for 25 years starting from mid-2009," he said. An additional 1.2 million tonne LNG could also be made available, the source said.

GAIL, which was mandated by the Government to meet the LNG requirement of the Dabhol power plant, is currently negotiating supply terms and pricing and a term sheet was expected to be signed soon.

Ratnagiri Gas and Power, a GAIL and National Thermal Power Corp (NTPC) joint venture - restarted Block-II on May 1, 2006 using stored naphtha. Block-II can generate 740 Mw (17 million units of electricity per day) but was only generating about 5 million units per day using naphtha as feedstock.

It is yet to begun full commercial sale due to feedstock constraints and supplies power to Maharashtra State Electricty Board (MSEB) at Rs 4.25 per unit.

The source said GAIL had in May bought 60,000 tonne of spot LNG from Sonatrach of Algeria at an ex-ship price of $9.28 per million British thermal unit (mBtu).

"Spot LNG prices are generally higher. A long-term contract will see a much lower price," he said.

The 1,444 Mw Phase II of the Dabhol plant is likely to be completed by year end and GAIL and NTPC-owned Ratnagiri Gas have told MSEB that the plant would begin receiving LNG supplies from 2007, the source said.

Petronet LNG Ltd, a company promoted by GAIL, IOC, BPCL and ONGC, has arranged import of 1.2 million tpa of LNG from Qatar, which will be available from the beginning of 2007. This quantity can be supplied to Ratnagiri Power Plant.

The 740 Mw Phase-I was shut down four years ago following a payment dispute. The 2.5 million tpa LNG terminal is still only 70 per cent complete and PLL would import LNG from Qatar at its Dahej terminal in Gujarat and than pipe the regassified-LNG to Dabhol, he said. The power plant (740 Mw Phase-1 and 1,444 MW Phase-II) requires 2.1 million tpa of LNG.