India offers concessions to run power plants on regasified LNG

Mumbai (Platts)--26 Mar 2015 350 am EDT/750 GMT

The Indian government, in an effort to restart gas-fired power stations shut due to a domestic natural gas shortage, has announced a set of concessions to let them run on imported regasified LNG.

Thirty-one power stations with a total capacity of 14,305 MW stranded for want of gas will now be eligible to bid for government support to run up to 30% of their installed capacity with funds from a pool of the Power System Development Fund, Power Minister Piyush Goyal told reporters after a cabinet meeting Wednesday, according to a statement from the Cabinet Committee on Economic Affairs.

Goyal said state-owned gas transportation utility GAIL and Gujarat State Petroleum Corp. have been asked to import LNG from the spot market to supply RLNG to power stations.

With limited spare regasification capacity at the existing LNG terminals, gas supply to the stranded power stations would be limited to around 10 million cu m/d (353,000 Mcf/d) during the monsoon months, when port operations become difficult at some of the jetties, and 18 million cu m/d for rest of the year, Goyal said.

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To make the use of regasified-LNG cheaper and viable for power producers so they are able to keep the power tariff low, the government has asked the gas transportation utilities and LNG terminals to reduce their transportation tariffs, marketing margins and regasification charges.

"The mechanism also envisages sacrifices to be made collectively by all stakeholders, including the central and state governments by way of exemptions from certain applicable taxes and levies on the incremental RLNG being imported for the purpose," the CCEA said.

The power plants have been idle since gas supply from Reliance Industries' KG-D6 block was halted in March 2013 due to low production.

Most of the plants were built mainly on the promise of cheap domestic gas from the KG-D6 field -- fixed at $4.20/MMBtu in 2010 -- but they were unable to switch to higher-priced LNG imports.

However, LNG prices have drop by half in the last year.

Platts DES West India LNG for May delivery was assessed at $7.25/MMBtu on March 25, down from $14.80/MMBtu at the same time last year.

India currently has four operational LNG terminals, all on the west coast.

These include Petronet's 10 million mt/year Dahej terminal and Shell's 5 million mt/year terminal Hazira in Gujarat state, GAIL's 5 million mt/year Dabhol terminal in Maharashtra state, and Petronet's 5 million mt/year Kochi terminal in Kerala state.

The Dabhol terminal typically receives cargoes over January-April and November-December.

The terminal has to typically shut over May-October, because it is not protected by a breakwater and choppy seas during monsoon season make it unable to receive cargoes.

--M.C Vaijayanthi,
--Max Gostelow,
--Edited by Meghan Gordon,, and Mriganka Jaipuriyar,

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