RIL sends draft gas supply deals to power firms

After concluding supply contracts with fertiliser companies a week ago, Reliance Industries (RIL) has sent draft agreements to power companies, which are the next in line to receive natural gas from its Krishna Godavari basin reserves.

However, who gets the gas will finally be decided at Thursday’s meeting of the empowered group of ministers (eGoM).

“It is not clear as to what the basis for calculating the amount of gas will be and whether there will be priority given to Andhra Pradesh firms,” pointed out an official from one of the half a dozen or so power companies in line to receive gas from RIL in the first lot.
While there were demands from the AP government for special privileges for units in the state, the last meeting of the eGoM in January had been non-committal on the issue, leaving it to be thrashed out in later meetings.

India has a total power generation capacity of 150,000 megawatts, of which about 10% is in plants that are designed to be run either on gas alone or on gas and liquid fuels. Due to the shortage of gas, only around a fifth of this capacity is currently being run on gas, with the remaining either remaining shut or running on costly liquid alternatives. RIL’s gas is expected to cater to this pent up demand.

“We can’t use imported gas because there are no ports in the vicinity that have a re-gasification facility,” pointed out another official with a company that has gas-based power generation projects in Andhra Pradesh.

Indeed, many plants such as that of GVK and GMR have been idling for months, if not years, as the gas they were eyeing failed to materialise. “We put up the plant on the back of a firm commitment from GAIL that it will supply us with gas. They were unable to do so and we had no option but to idle it,” the official pointed out.

Though AP accounts for only around 13 out of the total power sector capacity of around 80 daily cubic metres (mmscmd) of gas, preference given to firms from the state may leave little to others further downstream since the the total allotment for the power sector is only 18 mmscmd. Out of this, 8.5 mmscmd has already been promised to Ratnagiri (Dabhol) power project.