The Hindu Business Line : Price bids for Bidadi to open next month

UNDETERRED by the volatile international oil markets, Karnataka Power Corporation Ltd (KPCL) has decided to go ahead with the price bids for fuel supply to the 1400-MW Bidadi gas station.

According to sources, the price bids would open in the second half of October. At present, there are three technically qualified bidders for the project — the ONGC-Petronet combine, the IOC-Petronas of Malyasia combine and Reliance Industries Ltd (RIL).

They said that the bid conditions were modified in line with the demands made by some of the bidders. Under the modified conditions, contract execution terms were made flexible. The timeframe prescribed is between 36 months and 48 months from the date of awarding the contract.

The fuel supply contract is for a period of 15 years with a grace period of another two years.

The Bidadi station is expected to require at least 1.4 million tonnes of gas per year, assuming a plant load factor of 85 per cent. This translates into about 73 million British thermal units. (51.81 MMBTU = one tonne).

The sources said that the modifications were made as bidders such as the IOC and the ONGC combines would require longer period for implementation, since their projects involved setting up regassification facilities.

However, in the case of RIL no regassification or liquiefication facilities would be necessary since the gas is to be sourced from its gas field in the Krishna-Godavari basin.

All the three suppliers have already been told that the price bids for the Gandhar and Kawas contracts would be the benchmark. For the 648-MW Gandhar and the 645-MW Kawas, RIL had emerged as the lowest bidder, quoting a delivery point tariff of $2.97 per million British thermal units (MMBTU). Inclusive of duties, local taxes and transmission losses, the final delivered tariff is estimated at about $3.2 per MMBTU.

However, industry sources said there were some initial uncertainties about the bidders' ability to meet the NTPC (National Thermal Power Corporation) benchmark. This was on account of the international oil spikes. Two of the largest Asian consumers of gas currently have tariffs linked to crude prices. With oil prices at over $50 barrel or $367 per tonne, the sources said that the KPCL benchmark was initially seen as too rigid. This was because two of the short-listed bidders would be sourcing gas from West Asia or from Malaysia.

But the sources said that some of the crude-linked long-term contracts negotiated by Japan and Korea had begun maturing and were due for renegotiation. These consumers along with India and China have begun demanding that gas tariffs be delinked from crude prices.

Instead these consuming countries have sought long-term supply contracts. Such contracts allowed suppliers to insulate themselves from oil prices and at the same consumers were allowed a fixed price over a long period. Besides new suppliers like Russia from the Siberian gas fields have begun deliveries on the basis of fixed price contracts. As a result, West Asian and Malaysian suppliers were expected to relent allowing for fixed price contracts along with tariffs linked to the costs of extraction.

Such a price structure, the sources said would help beat down gas tariffs for the Bidadi plant even lower than the NTPC benchmark.

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