Pool pricing to lower Dabhol power cost

Cabinet secretary BK Chaturvedi?s idea of working out an average price of gas by mixing short-term and long-term imports for firing the Dabhol unit is likely to bring down the cost of electricity from the project in Maharashtra at Rs 2.83 a unit, oil ministry officials said.

The Centre decided to combine the price of gas being imported in ships by Petronet LNG ? a privately registered company promoted by stateowned oil companies ? under long-term deal with costlier fuel for Dabhol being bought from spot markets to work out a lower average cost.

Petronet has tied up 1.5 million tonnes of LNG through 24 shiploads for meeting Dabhol?s requirement till September 2009. This gas will be supplied to Dabhol at $10-10.5 per mBtu. At this price, the generation cost works out to Rs 4.40 per unit.

Since this is too high for comfort, the oil ministry gave the idea of pooling the price of gas being imported specifically for Dabhol with Petronet?s existing imports of five million tonnes from Qatar as part of a long-term deal that are cheaper. Petronet charges $4.6 per mBtu for selling gas imported from Qatar.

After averaging the two prices, delivered cost of gas to Dabhol comes to $5.73 mBtu without customs and $5.84 mBtu with import duty. At these prices, variable cost of electricity generation is around Rs 1.85 per unit. A Re 1 per unit fixed cost will be added. The ministry wanted to sell electricity from Dabhol at Rs 3.40 per unit, using the incremental revenue to fund completion of LNG import and re-gassiciation terminal adjacent to the power plant.

Source: The Times of India, New Delhi, January 29, 2007
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