NTPC may buy RIL gas at $4.20/mmBtu

After a series of flip-flops, NTPC is likely to finally sign an agreement with Reliance Industries this week to buy government-allotted natural gas at officially approved price of $4.20 per mmBtu.

However, the state-run power utility may initially draw less than one-fourth of its allocation.

"NTPC has informed that they have got internal approvals for signing of the Gas Sales and Purchase Agreement (GSPA) and it may be signed in the next couple of days," an oil ministry official said after a meeting called to review unsigned GSPAs.

The government had last year allocated 2.67 million cubic metres per day of KG-D6 gas to NTPC's Kawas, Gandhar and Anta power plants in Gujarat, a move that drew huge protests from RIL that wanted the pending legal dispute over gas it had committed in a 2004 tender of the state-run firm was resolved.

NTPC vehemently fought back saying its litigation against RIL was for future expansion projects at Kawas and Gandhar and the present supplies were for present plants.

After the allocation was confirmed, it did a volte face refusing to take gas for existing Kawas and Gandhar plants. "Against an allocation of 2.67 mmscmd, GSPA for only 0.61 mmscmd of gas for Anta unit will be signed for now," he said.

"The government will have to take a call on reallocating the remaining gas to NTPC's other plants."

NPTC, which unlike the 40-odd customers of KG-D6 gas was initially opposed paying $0.135 per mmBtu marketing margin to RIL, has agreed to pay the levy.

The official said of the initial 40 mmscmd of output from RIL's KG-D6 field, NTPC, Dabhol power plant, Essar Power and Oil and Natural Gas Corp are yet to draw a single unit. RIL can produce over 60 mmscmd of gas from KG-D6 fields but is restricting output to 37 mmscmd in the absence of offtake from existing customers like NTPC and failure of the government to name consumers beyond the initial 40 mmscmd.

At the meeting on Tuesday, Ratnagiri Gas and Power Pvt Ltd -- the firm that runs the 2,150-MW Dabhol power plant in Maharashtra -- informed that it will begin drawing 5.67 mmscmd gas from October 1, the official said.

ONGC, which had been allocated 0.4 mmscmd for its LPG extraction plants, was likely to sign GSPA by mid-October as it was yet to arrange for a suitable swap, he said.

KG-D6 gas is lean (only methane) and cannot be used to extract LPG. So this gas will have to be swapped with some users who are currently using rich-gas from western offshore.

The government had allocated 3 mmscmd of KG-D6 gas for LPG plants, and of this state gas utility GAIL has taken 2.59 mmscmd.

Essar Power was negotiating a gas transportation agreement for taking KG-D6 gas at its Hazira plant in Gujarat.