RIL, NTPC join forces to ease gas shortage in Andhra Pradesh

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sacchitjogi07

14 April, 2011

Mukesh Ambani run Reliance Industries Limited (RIL) has decided to lock hands with the National Thermal Power Corporation (NTPC) in an effort to ensure increased supply of gas to Andhra Pradesh power projects.

MUKESH AMBANI run Reliance Industries Limited (RIL) has decided to collaborate with the National Thermal Power Corporation (NTPC) in an effort to ensure increased supply of gas to Andhra Pradesh power projects. Gas marketer and transporter Gas Authority of India Limited (GAIL) will also be a part of this arrangement.

As per the proposed deal, the NTPC power plants in North India will get re-gassified liquefied natural gas (RNLG) through the GAIL pipeline, while the share of gas it gets from RIL’s D6 block off the east coast will be supplied to Andhra power plants. Currently, NTPC has agreed to the deal in principle, although any finalization will be made by this month end.

Reliance’s D6 block supplies gas to NTPC and GAIL. While NTPC makes use of this gas for its power plants in Northern India, GAIL employs its share of gas in its petrochemical plant at Pata in Uttar Pradesh, as sanctioned by the government.

There currently exists no re-gassification terminal on the east coast, causing Andhra power plants limited access to gas from its domestic sources, including the D6 block.

This has led to a serious shortage in gas requirements, especially since the production from D6 block has reduced more than 10 per cent to less than 50 million standard cubic metre a day (mscmd) from 62 mscmd in March 2010.

The deal looks for a swapping solution to compensate for the volume that is actually supplied. This will optimize the use of pipelines greatly as the gas from D6 block, now, will not need to travel from east to west and RLNG from west to east.

The presence of GAIL in this deal is likely to ease the taxation incidence that Reliance has been worrying about.

Although Reliance Industries quarters were reluctant in getting into this deal due to issues regarding taxation, a favorable state of things at the petroleum ministry has encourage RIL to take the step. Just last month, RIL had signed a deal with GAIL for swapping gas from D6 with RLNG. This deal will mark a second one for Reliance on similar lines.