India's CEA Recommends Five Additional Power Plants for Gas Supplies from Krishna-Godavari Basin

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Researched by Industrial Info Resources (Sugar Land, Texas)--Even as the Ambani brothers remain at loggerheads with each other and the government of India over the issue of gas supplies from the Krishna-Godavari (KG) basin, the Central Electricity Authority (CEA) (New Delhi), the technical arm of the Union Ministry of Power, has identified five power plants for the supply of natural gas from the KG D6 fields, operated by Reliance Industries Limited (BSE:500325) (RIL) (Mumbai). The five power plants--two in Delhi, one in Andhra Pradesh, one in Karnataka, and one in Gujarat--are seeking a minimum allocation of 4.73 million standard cubic meters per day of gas.

The plan recommended by the CEA includes allocation of:

• 1.37 million standard cubic meters per day of gas to the 366-megawatt (MW) Kondapalli extension project near Vijayawada in Andhra Pradesh. Under development by Lanco Infratech Limited (BSE:532778) (Hyderabad, Andhra Pradesh), the project is scheduled for commissioning in February 2010.
• 1.21 million standard cubic meters per day of gas to the 374-MW Utran combined-cycle power plant extension project in Gujarat being developed by Gujarat State Electricity Corporation Limited (Gandhinagar). The project is scheduled for commissioning in November this year. Additionally, the CEA has requested an immediate supply of 2 million standard cubic meters per day of gas to facilitate commissioning and testing activities at the power plant.
• 820,000 cubic meters per day of gas to the 220-MW Tanir Bavi barge-mounted combined cycle power plant in Mangalore, Karnataka, being developed by GMR Energy Limited (Bangalore, Karnataka). Supply of gas is scheduled to begin in March 2010.
• 930,000 cubic meters per day of gas to the 250-MW Bawana power plant in Delhi. Scheduled for commissioning in March 2010, this will be the first unit of the 1,600-MW power facility being developed by Bharat Heavy Electricals Limited (BSE:500103) (Mumbai). Three more gas turbines and two steam turbines, each with a capacity of 250 MW, are scheduled for commissioning by October 2010.
• 400,000 cubic meters per day of gas to the 108-MW Tithalia power plant in Delhi.

The allocations recommended by the CEA are based on a maximum power generation capacity of 70% at the five facilities. If all the plants operated at 100% capacity, the total gas requirement would amount to 6.33 million standard cubic meters per day.

RIL currently produces 36 million standard cubic meters per day of gas from the KG D6 gas fields, against a potential capacity of 60 million standard cubic meters per day. According to the Directorate General of Hydrocarbons, eight wells are currently in operation in the KG D6 fields, producing a total of 50 million to 52 million standard cubic meters per day of gas. By the end of this month, nine additional wells are expected to commence operations, increasing the total production capacity of the fields to 80 million standard cubic meters per day.

Under the Gas Utilization Policy, the firm is required to allocate 40 million standard cubic meters per day of gas primarily to the fertilizer and power industries. The government has yet to identify potential customers for the remaining production potential of the fields. The firm is not permitted to sell gas to any user, including its own refineries and the five power plants identified by the CEA, unless the government grants approval to any proposed allocation of gas.

RIL has entered into contracts to supply 25.07 million standard cubic meters per day of gas to 19 power plants, 14.96 million standard cubic meters per day of gas to 15 fertilizer plants, and 3.31 million standard cubic meters per day of gas to steel manufacturing plants. The fertilizer plants were given the first right of use for gas produced in the KG D6 fields. These plants have procured 14.5 million standard cubic meters per day of gas since the beginning of this month. Power plants are being supplied with 18 million standard cubic meters per day of gas, while steelmakers such as Essar Steel Limited (Mumbai) are procuring between 3 million and 3.5 million standard cubic meters per day.

Some of the customers identified by the government in the power sector have yet to withdraw gas from the KG D6 fields. These include Ratnagiri Gas and Power Private Limited (RGPPL) (New Delhi), which was allotted 2.7 million standard cubic meters per day of gas. The firm, which operates the 2,150-MW Dabhol power plant in Maharashtra, currently obtains between 4 million and 5 million standard cubic meters per day of imported liquefied natural gas (LNG) from Petronet LNG Limited (BSE:532522) (New Delhi) under a take-or-pay agreement that will expire in September this year. RIL's gas sales will exceed 40 million standard cubic meters per day once RGPPL starts withdrawing its allotted quota of gas from the KG D6 fields.

State-run thermal power generating company NTPC Limited (BSE:532555) (New Delhi) has been allotted 2.67 million standard cubic meters per day of gas but has yet to enter into an agreement with RIL for the same. The two firms are at loggerheads and have litigation pending in the Mumbai High Court. NTPC has charged RIL with failure to fulfill a contract to supply 12 million standard cubic meters per day of natural gas for a period of 17 years at the rate of $2.34 per million British thermal units. For additional information, see news article from July 10, 2009 - Ambani Brothers' Dispute About Gas Prices Could Cost India $820 Million.

According to recent reports, the supply of gas from the KG basin has helped increase power generation in the country by 7.02% in the month of June compared to the same period last year. During this period, gas-turbine-based power generation showed an increase of nearly 36% year over year, while overall thermal power generation increased by more than 12%. In June 2008, power generation from gas turbines stood at 5.271 billion kilowatt-hours (kWh). This increased to 7.165 billion kWh in June 2009. For the April-June 2009 period, gas-turbine-based power generation stood at 21.307 billion kWh, an increase of 20.6% from the generation of 17.66 billion kWh recorded in April-June 2008.

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