The Hindu Business Line : Global gas price hike to push up Dabhol power tariffs

POWER tariffs from the 2,184-megawatt (MW) gas-fired Dabhol project are expected to overshoot estimates in view of the sharp increase in international gas prices.

The Dabhol project is currently operated by Ratnagiri Gas and Power Pvt Ltd — an NTPC-GAIL joint venture. Current estimates of power tariffs are that it would be upwards of Rs 3 a unit. This is on account of the steep increase in fuel prices.

NTPC sources said that unless they are in a position to secure gas at a tariff between $3 and $3.65 per million metric British thermal units (MMBTU), they would not be in a position to hold power tariffs at the original estimates. This would have translated into a power tariff Rs 2.30 or even Rs 2.75 a unit. These tariffs were estimated by the Empowered Group of Ministers (eGoM). The original fuel cost estimates would have translated into a fuel cost of Re 1 per unit. However, the fuel cost estimates were made when oil prices were under $40 a barrel. Gas prices move in tandem with international oil prices. International gas prices (with cost, insurance and freight) are currently about $12 per MMBTU at the New York Metal Exchange, while international oil prices are ruling close to $70 a barrel. As a result, the fuel cost component alone translated to over Rs 2 per unit.

At such high fuel costs, there is again a question mark over the Dabhol project's viability, sources said. "Unless the tariffs are close to thermal power plants, it is not viable to operate the plant," the sources said.

This means that the gas prices would have to be close to domestic coal prices for ensuring the project viability.

Consequently, efforts are on to source gas from domestic fields. "We would prefer to have domestic gas, since we expect those tariffs to be close to expectations," they added. Gas requirement for the project is estimated at 2.1 million tonnes per annum for operating at a peak plant load factor. Domestic gas is preferred, since such sources bypassed certain fixed elements and would therefore keep fuel costs at the original estimates. Sourcing gas from the international suppliers, on the other hand, involves liquefaction, transportation and re-gassification, which push up costs.

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