The survival of National Thermal Power Corporation (NTPC) Ltd's thermal power plant at Kayamkulam is linked to the pricing mechanism of natural gas, that is, the plant can solve the energy crisis of Kerala if the global pricing system takes a new turn. Alternatively, the Union government will have to take measures to end the disparity in the prices of domestic and imported gas.
Global prices are set according to an international system. There are a few popular formulae to calculate the prices. Two of the most widely accepted pricing systems are Japan Crude Cocktail (JCC) and Henry Hub pricing. Both are linked to international crude prices, according to experts in the industry.
Natural gas is supplied mostly on long-term contracts.
The gas can be brought through spot markets as well. With increased availability of natural gas, spot prices have become more attractive.
In the event of natural gas-based power production at the NTPC unit, gas could be sourced from the Petronet LNG terminal where gas is supplied on a long-term international contract.
The price of imported gas reaching Kayamkulam could be a matter of concern to Kerala State Electricity Board, which is the sole purchaser of power from the plant. Unless the prices are low, the cost of production will go up, resulting in higher price for electricity generated at the plant. The NTPC has been providing electricity under its naphtha-based fuelling system at about Rs.7 a unit, whereas the KSEB has been getting power at cheaper rates from other sources.
If LNG is made available at lower prices, the plant could function at its installed capacity of 350 MW. The plant has a plan to increase the capacity to 1,050 MW. Again, the expansion plan is hinged on the profitability of operation.
At present, the prices of imported LNG offered to entities in Kerala are above $12 per million Btu (British thermal units), while the gas available from domestic sources are provided at less than half that price. Kerala being not connected to the national gas grid, it has to depend on imported gas.
Source- The Hindu