LNG unlikely to fire Dabhol plant

,The Economic Times, New Delhi, October 13, 2006

LNG may not fire the Dabhol power plant after all. The cabinet secretary has asked the petroleum ministry to explore the possibility of long-term fuel supplies by domestic companies such as Reliance Industries, ONGC, British Gas to make power generated by the Dabhol power plant affordable.

The government is now veering around to the view that the plant cannot be sustained on LNG as it would tend to be both a volatile and expensive fuel. Domestic gas on the other hand would be both cheaper and stable in supplies. With RIL set to begin gas production from the KG basin in 2008, the government has now asked RIL to see if gas can be fed to the Dabhol power plant as well.

This is for the first time that the governmentn is now talking of natural gas as a fuel instead of LNG. LNG can however, be taken as a back up fuel in the short term.

Both the power ministry and Ratnagiri Gas and Power Private (RGPPL) are willing to offer up to 40% equity stake to any domestic oil firm along with Petronet LNG Ltd (PLL) in hived-off LNG terminal to ensure long-term fuel supply. They believe that 40% equity stake in the terminal is enough to incentivise the fuel supplier for a longterm commitment, an official said.

It is estimated that 40% equity stake in the hived-off LNG terminal would cost little over Rs 1,000 crore to the prospective joint venture partners.