The Hindu Business Line : Karnataka Power Corpn may diversify into gas trading

THE State-owned power utility, Karnataka Power Corporation Ltd (KPCL), has proposed entering into natural gas trading in an attempt to become a diversified energy company.

Company sources said that the proposal was still in the drawing board stage. But if allowed to become a gas trader, it would do so through its special purpose vehicle, KPC Bidadi Power Company Ltd. The proposal, the sources said, involved laying pipelines along some of the national highway corridors within the State initially and later, extend it to the neighbouring States as well. This pipeline would, in turn, have feeders in the smaller town and villages.

The proposal, the sources said, would aim to restrict consumption of imported fuels. Demand from the Southern regions for gas is currently estimated at around 60 million metric standard cubic metres per day (mmscmd) and is expected to rise to about 90 million mmscmd.

The sources said that the State-owned transport utilities were targeted to consume at least 200 mega-watts (MW) equivalent per day. This would translate into approximately 166.22 mmscmd.KPC Bidadi is implementing the 1400-MW gas-based power station on the outskirts of Bangalore, the only State-owned utility to do so. The fuel supplier is expected to be selected shortly for the Rs 4,200-crore project, targeted to become operational by 2007-08.

KPC Bidadi's gas trading proposal comes at a time when some of the intending suppliers have sought a 10-year offtake for a minimum of 10 mmscmd. The suppliers who had sought such minimum offtake conditions included Reliance Industries Ltd, from its Krishna-Godavari gas fields. KPC Bidadi's 1400-MW plant requirement was estimated to consume only about half of this figure for operating at 85-per cent plant load factor. Accordingly, the sources said, there would be substantial surplus gas available for trading.

Besides, KPC also wants to take advantage of the mounting environment concerns and the pressure to shift to gas for transportation in some of the urban areas. The sources said that shifting to gas-based transportation would bring down the fuel bills by all the State-owned transport utilities by half.

This is because gas prices are currently less than half of the diesel, even after factoring in taxes.

The major handicap for conversion to gas was the non-availability of a bulk supplier and retail dispensing stations. Accordingly, KPCL intended to take the role of the bulk gas trader with a series of take or pay arrangements with retail gas dispensing, the sources said.

The sources added that the proposal also involved setting up a retail pipeline in the urban households for gas and encouraged the shift from liquified petroleum gas. This was to be done on the lines of the Indraprastha Gas Ltd in New Delhi and the Mahanagar Gas in Mumbai.

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