The Hindu Business Line : RIL bags NTPC order to supply gas

RELIANCE Industries Ltd has bagged a National Thermal Power Corporation (NTPC) order to supply 3 million tonnes of natural gas per annum for the latter's proposed 1300-MW power stations at Kawas and Gandhar in Gujarat for seventeen years.

Reliance, which will be supplying gas from its fields in the Krishna Godavari (KG) basin, will supply gas at a delivered total cost (inclusive of transportation, taxes and duties) of $2.97 per million British thermal units (mmbtu).

The gas price has an 85 per cent fixed component, while the remaining 15 per cent is indexed to inflation rate.

This translates into a first year power generation cost of around Rs 2 per unit of electricity, with fuel comprising Rs 1 per unit. The NTPC Chairman and Managing Director, Mr C.P. Jain, told Business Line that, "We are satisfied with the bid result."

The RIL gas price is only 50 cent per mmbtu more than that offered (delivered basis) by the Oil and Natural Gas Corporation (ONGC) from its Bombay high fields to the power industry.

ONGC claims that its price is below the market price and has been pushing the Government for a hike. Its case for a hike in consumer prices is likely to suffer a setback given RIL's delivered price.

Importantly, the RIL deal for NTPC is laden with more risk for the supplier, with a damages clause in the event of non-supply amounting to the difference between the market price of naphtha and the natural gas price.

In the case of ONGC gas, there is no such obligation on the part of the supplier.

For RIL, the NTPC deal means monetising around 2.6 trillion cubic feet (tcf) gas from its KG basin field that has 15 tcf of commercially extractable gas.

Reliance's quote is way below that of its only other competitor Petronas LNG. Petronas quoted only for the LNG supply component ($3.45 per mmbtu). Coupled with the only other quote, that of Petronet LNG Ltd (PLL), which quoted for regassification services ($0.65 per mmbtu), the total delivered cost of gas at the power plant comes to $4.14 per mmbtu.

This is incidentally lower that the price offered by the only LNG supplier in the country, PLL. PLL supplies gas at over $4.5 per mmbtu in Gujarat.

"The RIL offer is attractive. We are, however, not entirely satisfied with the LNG pricing of the second best bid. We hoped for a more aggressive price. The LNG price may be seen in the light of the high crude prices in the global market," Mr B.P. Singh, General Manager, NTPC told Business Line.

Another bidder, Yemen LNG submitted a bid that turned out to be non-responsive, industry sources said.

NTPC is already in the market to acquire another 2 million tonnes of gas/LNG for its proposed 2300 MW Kayamkulam plant in Kerala.

The bids are likely to be finalised by the end of current year.