Govt looks to Reliance gas for Dabhol restart

Weighed by fuel worries and a worsening power situation, government managers are turning focus on Reliance Industries' gas field as a long-term supply source for Dabhol power project. Recent brainstorming sessions on the issue have seen the Mukesh Amabani-controlled firm being mentioned as providing a viable alternative to costlier naphtha or gas imported in ships.

Efforts to secure long-term supplies at prices suitable for generating cheap power have failed. RGPPL, promoted by GAIL and NTPC for reviving Dabhol, has assured supplies from Petronet till September 2009. Petronet will supply Dabhol at $4.95/mBtu (million British thermal unit) by pooling prices of gas from its high-cost short-term imports with cheaper long-term contract.

Beyond 2009 Dabhol will have to buy from global market at $8-9 mBtu. At this level, power will become prohibitive. Chances of securing long-term supplies also look bleak as new capacities starting from 2012 worldwide have been tied up. This will only leave spot buying at $10 mBtu, forcing the government to subsidise power.

Dabhol's LNG terminal is also not complete and needs Rs 500-600 crore. GAIL board has blocked the proposal to pump Rs 500 crore. Capacity constraints at Petronet's sole terminal will thus make spot imports tough to sustain for long. Reliance will pump gas from June next year and could supply Dabhol at $6 mBtu, allowing generation at Rs 2.50 a unit. This price is lower than the $7.5 mBtu delivered cost of gas through Iran-India pipeline, if at all it comes.

But there's a catch. NTPC has dragged Reliance to court over a 2004 gas deal for supply to a new plant at Kawas. Reliance won the bid offering a $2.98 mBtu price, when crude was at $25/barrel. While the two are engaged in a legal slugfest, gas prices have soared to $9-10 mBtu and crude is averaging $60/barrel.

Source: The Times of India, New Delhi, 30 May 2007
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