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Home News Power Sector News NTPC, GAIL spar on gas for 1950 MW Kayamkulam project

NTPC, GAIL spar on gas for 1950 MW Kayamkulam project

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Rajiv Gandhi Combined Cycle Power ProjectState-owned firms NTPC Ltd and GAIL (India) Ltd are sparring over the terms of the gas sales purchase agreement (GSPA) for the 1,950MW Kayamkulam project in Kerala, known as the Rajiv Gandhi Combined Cycle Power Project. Both firms admit that there are differences but differ on the reasons for these. NTPC claims gas supply risks aren’t being shared by the two firms and that it is bearing most of these. And GAIL claims NTPC is refusing to start work with the so-called contracted quantity of gas and is worried about lining up all the gas it needs for the project.

Gas for the Kayamkulam project will be sourced by Petronet LNG Ltd, or PLL, which recently signed the GSPA for the long-term supply of 1.5 million tonnes per annum (mtpa) liquefied natural gas (LNG) with Exxon Mobil from the Gorgon project in western Australia. The LNG cargo will be delivered at PLL’s LNG facility at Kochi, which will have a 5 mtpa capacity and is scheduled to be commissioned in 2011.

The gas will be transported and marketed by GAIL to the project through its Kochi-NTPC Kayamkulam offshore pipeline project.

“GAIL wants the risk to be with beneficiary. Since we will be the captive consumers, risk is not getting shared. Discussions are on. Till all issues are resolved, we cannot sign the GSPA,” said a top NTPC executive who did not wish to be identified.

However, B.C. Tripathi, chairman and managing director of GAIL, denied any difference on risk-sharing and said, “They (NTPC) wanted full quantity of gas for the project. We said we can give for one unit based on which you can start work and we will procure additional gas as the need arises. This is the only difference. If they do not start planning on this, there will be a delay in laying the pipeline.”

NTPC is cautious about signing the GSPA as it is already involved in a lawsuit with Mukesh Ambani-owned Reliance Industries Ltd in the Bombay high court, with the point of contention being the existence and terms of a valid contract between the two.

“In most of the cases, tranporter will not share the risk. This is the basic format in most of the gas transmission agreement. In NTPC’s perspective the supplier for gas is GAIL. In that case, GAIL has to bear the supplier part of the risk,” said Prayesh Jain, an analyst at stock market research firm India Infoline Ltd.

This is not the first time that the project has faced problems.

NTPC was earlier targeting investments from the Qatar Investment Authority for the project in the hope that such an arrangement would have helped in securing fuel supplies.

However, there was no interest on the part of the Qatar government in the project.

“We expect a total gas supply of around 10 million standard cubic metres per day (mscmd) from Australia to be priced at around $9.8 per million British thermal unit (mmBtu). However, the delivered price of the gas is expected to be as high as $14 to $15 per mmBtu,” said the NTPC executive.


Source - Mint
 

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