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Krishna-Godavari gas finds — Reliance offers gas to State power utilities

C. Shivkumar

BANGALORE, Nov. 27

RELIANCE Industries Ltd (RIL) has begun hawking its natural gas finds from the Krishna Godavari Basin directly to the State power utilities.

RIL has made its first pitch to the state owned generating company Karnataka Power Corporation Ltd (KPCL) and was in the process of making similar offers to Andhra Pradesh and Tamil Nadu as well.

Sources said here that RIL had offered to provide the gas linkage for the proposed 700 MW plant of KPCL at Bidadi on the outskirts of Bangalore. This project has been hanging fire for more than three years, since KPCL has not been able to find fuel linkage. Reliance has offered to meet the fuel requirements. When contacted, Mr K. Jothiramalingam Managing Director of KPCL confirmed the offer by RIL. KPCL, he said, was examining the offer.

The LNG requirement for the Bidadi project assuming a plant load factor (PLF) of 85 per cent is expected to be in the region of about seven lakh tonnes per year. KPCL has been looking for flat c.i.f. (cost insurance and freight) gas price of about $4.3 per million British thermal units (mmbtu) or about $222 per tonne, the sources said. This would translate into approximately $155 million year (assuming 51.7 mmbtu = one tonne of LNG). This was expected to translate into a power tariff of about Rs 3.5 unit.

But KPCL hopes that RIL's gas would be rupee denominated in view of the domestic sourcing and would therefore cost substantially lower than international prices. This was because some components of costing would not be involved. These components include liquefication, shipping by cryogenic vessel and re-gasification at the terminal end. These components lead to escalation of the fixed cost component of tariff. In the absence of these elements, KPCL hopes that the tariff would be competitive to some of new coal fired stations.

But Reliance has so far not mentioned any tariff, though it has submitted its proposal for the expression of interest floated by KPCL along with Exxon and the Gas Authority of India Ltd (GAIL). But pipelining costs are expected to be factored in when the company submits its tariffs, the sources said.

The sources said that RIL had offered to set up a pipeline via Bidar and Raichur in the northern districts of Karnataka for supplying the gas. However, the sources added RIL had put forth some riders, which includes utilisation of gas by KPCL's Raichur Thermal stations as well. This the sources said would involve conversion of the existing coal fired stations into gas. Such a conversion was likely to lead to large investments. And the existing tariff for power supply from the bulk power buyer, the Power Transmission Corporation Ltd did not permit it. Currently the tariff from the average tariff from the thermal stations is in the region of Rs 2.20 a unit. Consequently, the sources said, KPCL was not agreeable to any switchover of fuel from coal to gas for the 7 units of KPCL of which 1260 MW are already generating and the seventh unit of 210 MW is expected to be synchronised by the end of this year.

KPCL was however prepared to consider gas as fuel for unit 8 of the Raichur thermal station, for the 500 MW Bellary expansion project and converting its 100 MW diesel fired station operated by a subsidiary company. This was provided the RIL's fuel price met its minimum tariff objective.

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