• Investment World
• eWorld
• Brand Line
• Mentor
• Life
• Brand Quest
• The New Manager
• BL Club
• Smartbuy
• Books
• Gallery

Stocks

• Quotes
• SE Diary
• Scoreboard
• Open-End Mutual Fund

Cross Currency

• Rates
  
  

Shipping

• Ports
  
  

Archives

• Yesterday
• Datewise
• Resources
• In Focus
• In Depth
• Events 2007

Group Sites

• The Hindu
• The Hindu ePaper
• Business Line
• Business Line ePaper
• Sportstar
• Frontline
• The Hindu eBooks
• The Hindu Images

Shamik Paul
C. Shivkumar

Bangalore, June 29 GAIL (India) Ltd has initiated moves to pick up equity stake in the 1400-MW Bidadi Gas project promoted by the Karnataka State Power Corporation Ltd.

The Chairman and Managing Director of GAIL, Mr U.D. Choubey, said, “We are interested in picking up equity stakes in select anchor customers, including the Bidadi plant.”

GAIL has a 38 per cent equity stake in Ratnagiri Gas and Power Corporation Ltd, vacated by the erstwhile multinational Enron. GAIL also has a 11.02 per cent stake in the Gujarat State Petronet Ltd.

The Bidadi gas project is estimated to cost about Rs 3,750 crore. Accordingly, the project equity was expected to be around Rs 750 crore, assuming a debt equity ratio of 4:1.

KPCL has formed a subsidiary for implementing the gas-based power project, with a Rs 30-crore, paid-up equity. A KPCL official said, “Equity stakes in the project can be considered only after the gas linkage is firmed up.” However, Mr Choubey declined to specify the equity stakes on offer.

GAIL’s gas equity sweetener comes as it readies to build pipelines to Bangalore from Dabhol and Kochi. The pipelines – when ready between 2011 and 2013 – would be able to provide at least 30 million standard cubic metres of gas a day to Bangalore.

The venture, intended to reduce the hydel dependence, has been hanging fire since 2005. Technically qualified bidders failed to submit their price bids for fuel supply to the project in 2005. At one point, KPCL had also wanted to set up its own gas terminal in Mangalore. Even this attempt failed to take off, as international gas supplies are normally on a take-or-pay basis. Consequently, there were suppliers for small requirements.

KPCL’s Bidadi project, when fully commissioned, will have a fuel requirement estimated at 1.26 million tonnes a year, at 85 per cent plant load factor, on the basis of a combined cycle operations. This translated into about 65 trillion British thermal units {One tonne = 51.81 million British thermal units (mmbtu)}.

The GAIL offer comes with the decline of global gas prices and the possibility of obtaining gas from domestic sources. International gas prices have now come down to about $4.2 a mmbtu. Accordingly, the fuel cost in the power tariff was likely to be in the region of about 0.98 paise a unit.

However, Mr Choubey said, “We have not indicated any long-term prices.”

The availability, though, was likely to be mostly in the form of lean gas, ideal for use as fuel for combustion in power projects. He said the final prices would depend on the backward linkages.

The backward linkages proposed were from Qatar, Oman or Australian suppliers. However, given the current situation, few suppliers were willing to make long-term price commitments. This was because global gas prices have seen double digit prices last year, when oil prices were into three digits.

In addition there was also the possibility of availability of gas from domestic sources, especially from the Krishna-Godavari Basin. Pricing from this region is still unclear, in view of the inter-corporate legal disputes.

Sources said once the pricing issue was sorted out by the Ministry of Petroleum and Natural Gas, viable long-term supply contracts were unlikely to be hindrances from domestic sources.

More Stories on : Petroleum | Outlook | GAIL (India) Ltd

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Copyright © 2009, The Hindu Business Line. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu Business Line