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Home News Power Sector News NTPC plans to import gas from Qatar- Power tariff will increase

NTPC plans to import gas from Qatar- Power tariff will increase

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NTPCPower consumers in the country could see higher tariffs, as NTPC — India’s largest power company — is planning to purchase additional natural gas from Qatar at higher rates. State-owned NTPC, which has gas purchase contracts with Reliance Industries and other domestic natural gas suppliers, needs more gas to feed its expansion programmes and for new plants, chairman RS Sharma told ET. “We are looking at Qatar and other gas-rich regions for securing (gas) the supplies for our projects. For example, we need around 15 mmscmd (metric million standard cubic meters per day) for our power projects at Kayakulam and Dabhol, and also need gas for our LNG (liquefied natural gas) terminal,” he said over the phone from Delhi.

Since gas, like coal, is a key feedstock for generating electricity, any increase in gas prices would mean higher tariffs. According to power industry thumb rule, every dollar increase in gas prices adds Rs 0.30 per unit to the generation cost of electricity.

Natural gas is mostly imported from Qatar through supply agreements. Petronet LNG, another state-owned gas supply company, buys gas from Qatar, which has abundant reserves of gas, and is world’s largest exporter. Qatar supplies 7.5 mt every year and has agreed to supply an additional 4 mt till 2013.

LNG supply from Qatar is expected to be at a price higher than the current contracted price of $10 million British thermal unit. People connected with the development said the current uptrend in crude oil prices, which serves as a benchmark to gas prices, could lead to a 30-40% higher contract price for natural gas also.

Domestic gas suppliers such as GAIL and IOC are available to utilities at a landed price of $6-7 per mmBtu, including the transportation cost.

NTPC receives about 1.2 mmscmd from Reliance’s KG-D6 fields at the government-approved price of $4.2
per mmBtu. It has also a long-term agreement with GAIL, IOC and BPCL for 1.2 mt, and had contracted an equal amount of imported LNG from Australia.

NTPC is keen for additional gas to assure supply for its proposed expansion and for new plants. The utility, which has a gas-based generating capacity of 5,000 mw, plans to double it in 3-4 years.

NTPC and GAIL have majority shareholders in Ratnagiri Gas & Power Company — formerly called Dabhol Power — are together setting up an LNG terminal with a capacity of 5 mt in Maharashtra, and also have plans for developing new terminals.

As India has limited gas supplies, new gas-fired projects would depend on imported gas. The power sector consumes 45% of the total gas supplied in the country, and is the largest consumer of natural gas. According to CARE Research, demand for gas from the power sector could double by 2012 from the current demand of 80 mmscmd.

The research firm in a recently released report said India would continue to rely on costly imported LNG. “Gas output from the Krishna-Godavari basin would not be able to wipe-out India’s gas deficit in the medium-term,” said research head Revati Kasture.
However, Boston Consulting Group partner P Harshvardhan said: “Costing of gas will much depend on the duration of contract, and going ahead the prices would soften on account of increased supply from other countries like Australia and Nigeria, where new facilities are coming up.”

Source- Economic Times

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