The Petroleum Ministry has directed GAIL (India) and Reliance Industries Ltd to supply gas to power plants in Andhra Pradesh by swapping Krishna Godavari Basin D6 gas with imported gas.

The drop in D6 gas output has resulted in the plants not being able to meet their optimum power generation capacity.

Sources told Business Line that in response to a request from the State Government, the Ministry directed the contractor (Reliance Industries). The Ministry had issued orders early this month for supply of about 2.5 mmscmd of gas through this mechanism.

Imported Price

Following this directive, the two entities will be signing an agreement. However, the price of the gas will be closer to the imported gas price. The prevailing spot liquefied natural gas price is about $13/mmBtu (excluding the marketing margin and other levies), while the D6 gas is priced at $4.2/mmBtu (landfall point).

This is in line with an arrangement worked out a year earlier (March 2011), where GAIL and Reliance had signed a swap agreement for supply of additional gas to power plants in the Southern State.

Swap connection

Since Andhra Pradesh does not have connectivity to an LNG plant and also R-LNG from plants located in Gujarat cannot flow from West to East against D6 flow from East to West, hence swapping with GAIL's gas was considered.

Thus, D6 gas from GAIL's LPG plants will be made available to power plants in Andhra Pradesh, compensating the equivalent quantity of imported gas. The supply arrangement through a gas swap deal with RIL and GAIL and later with gas-based Independent Power Producers (IPPs) located in Andhra Pradesh is aimed at helping the power-starved small-scale industries (SSIs). The State is seeking to expedite these agreements.

Power shortfall

The State's energy demand has gone up to 297 million units (mu) per day and the discoms are supplying 252 mu. The power deficit was attributed to reduced production and supply of gas from the KG Basin and drop in hydel power generation. Nine gas-based projects with installed capacity of 2,772 MW are currently generating around 1,500 MW due to supply of 49 per cent of total gas required.

Hydel generation this year so far has been only 5,837 mu against 7,048 mu last year. AP is able to get 1,280 MW of power of 1,920 MW ordered earlier due to severe transmission corridor constraints.

vrishi@thehindu.co.in

(This article was published on March 9, 2012)
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