The Hindu Business Line : PPN Power co switching over to natural gas

Chennai April 28 PPN Power Generating Company Pvt Ltd, a private power producer with a 330.5-MW plant in Tamil Nadu, will switch over to gas in the last quarter of 2008. This will save the Tamil Nadu Electricity Board (TNEB), which buys power from it, nearly Rs 1,400 crore a year as fuel cost.

The company's plant at Pillaiperumalnallur in Nagapattinam district will get natural gas from an offshore field being developed by Hindustan Oil Exploration Co. Ltd.

High naphtha cost

The plant now runs on a mix of naphtha and natural gas. The plant will switch over to natural gas once the gas is made available, thus, saving on the high cost of naphtha. Fuel costs are fully borne by the State electricity boards. PPN's plant has for most of the time run on naphtha except on occasions when it got gas on a temporary basis.

Mr S. Narayanan, Managing Director, PPN Power, and Mr Manish Maheshwari, Joint Managing Director, Hindustan Oil Exploration Company, signed an agreement on Saturday in the presence of the Tamil Nadu Chief Minister, Mr M. Karunanidhi, and others.

PPN's plant, the largest of the private power producers in the State, started feeding power to the grid in April 2001. It has been running predominantly on naphtha, whose prices have risen from Rs 14,780 a tonne in April 2001 to about Rs 39,000 now. The variable cost of Rs 6.67 a unit because of using naphtha at current prices will come down to Rs 1.26 a unit once the plant switches over to natural gas, according to an official press release.

Hindustan Oil Exploration Company, a private petroleum exploration and production company, will supply gas at $3.75 a million British Thermal Unit for the first two years, $3.85 for the next two years and $3.95 for the fifth and sixth years. The gas supply agreement will be re-negotiated after that provided gas is still available in the field, according to reliable sources.

The gas price is extremely competitive considering the market price of natural gas now, according to the sources.

The price of a unit of electricity will drop from Rs 7.81 now (a fixed cost of Rs 1.14 a unit and a variable cost of Rs 6.67 a unit) to Rs 2.40 a unit (a fixed cost of Rs 1.14 and variable cost of Rs 1.26 a unit), at current prices. This will make PPN's project the cheapest private power producer in Tamil Nadu, sources added

With the gas agreement in place, considered an important milestone, Hindustan Oil Exploration Company will start work on the production facilities — drilling platform, pipeline and onshore plant — once it finalises various contracts. The project involves laying a 50-km pipeline, of which nearly 45 km will be offshore.

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