Economy

Gas-based power plants may have to rely on imported fuel

Richa Mishra New Delhi | Updated on July 29, 2013

Drop in domestic output puts the sector in a fix

Gas-based power projects may have to rely on expensive imported fuel (R-LNG) if the declining trend in domestic natural gas production continues. This would also mean higher electricity bills as input costs will go up.

To make such power projects economically viable for the producer, subsidy support from the Government will be necessary, while to lessen the impact on the end consumer, options such as price pooling across power sector – gas, coal, hydro etc – will be required, say industry officials.

A similar suggestion has been made by the Petroleum & Natural Gas Ministry in its presentation for the empowered group of ministers (eGoM) meeting which was scheduled for July 22. However, the meeting was postponed and is now expected to be held in the next few days.

While the ministerial panel is yet to take a call on re-prioritisation of domestic gas allocation due to drop in domestic output, the power sector is in a bind over the extreme variation in gas availability projections being made by the Petroleum & Natural Gas Ministry.

Substantial gas-based power capacity was built up in expectation of gas availability, but with a drop in output from the largest gas fields (Reliance Industries operated KG D6) today almost 24,000 MW of power capacity, or Rs 1,00,000 crore of power investments are stranded, power industry officials said.

In fact, the Power Ministry has issued an advisory to power developers not to plan projects till 2015-16.

At present, most of the gas from KG D6 gas is consumed by the fertiliser sector. The block is producing less than 14 million standard cubic metre a day (mmscmd) and this is expected to dip to 11 mmscmd. It is expected to increase to 19 mmscmd during first quarter of 2015 and remain at this level till 2016-17.

Additional domestic gas will be available largely from 2014-15 from fields of ONGC, Oil India and GSPC.

However, the quantity will not be significant. Substantial quantity in domestic production is expected only in 2016-7 and 2017-18 from ONGC and Reliance Industries.

In the last eGoM meeting, the panel had rejected a proposal to divert some of the D6 block gas from fertiliser to power sector.

In that meeting the Fertiliser Ministry was asked to indicate the additional quantum of urea that can be imported given the infrastructure constraint, indicate additional imported gas that can be absorbed by the sector, and additional requirement of gas for the newly converted plants.

> richa.mishra@thehindu.co.in

Published on July 29, 2013

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