The shortage and high import cost of natural gas has forced government-owned gas utility Gail India, which is diversifying into the downstream power sector, to tweak its growth strategy for the next decade and intensify upstream exploration of gas. While Gail will make cautious entry into the power sector with costly imported gas, its consolidation in the sector will have to wait till the company strikes gas in any of its 27 hydrocarbon blocks.
Gail will now look for consumers like factories and state utilities that are willing to buy power at unregulated prices, which is essential for the new business considering the non-availability of gas at administered price for fresh power projects.
Gail CMD BC Tripathi said that imported liquefied natural gas (LNG) now costs about $15 per million British thermal unit. When asked about its impact on Gail?s entry into the power sector, Tripathi told FE, ?The shortage (of domestic gas) and the high import cost are areas of concern. We will wait for a major gas strike in our blocks.?
The government has already cut down gas supplies to sectors like petrochemicals and steel so that existing units in core sectors like power and fertilisers get their contracted supplies. There is no gas at administered prices for setting up new power plants.
Expanding into the downstream power sector ? both gas-based as well as unconventional wind, solar, shale and coal gasification segments ? is the corner stone of Gail?s growth plan for the next few years, targeting a turnover of R1 lakh crore by 2016-17. But gas shortage could give Gail a strong bias towards upstream exploration than to the power sector.
The company, that now supplies gas to half of the country?s gas-based power plants, has already got a producing block in the Cambay basin and is expecting to start production from its two blocks in Myanmar early next year.
Gail?s road map for gas based power generation involves setting up a 220 mega watt (mw) unit for R880 crore at Usar near Mumbai, where it already has a LPG unit. Gail is now in the process of seeking customers for the power to be generated from here.
The company has also signed a deal with the Uttaranchal government for setting up two gas-based 250 mw each plants at Haridwar and Kashipur. The projects, which would be funded through 70% debt and the remaining with equity, has a total cost of about R2,000 crore. Besides, it is studying the feasibility of a 330 mw plant at Vijaipur and another 350 mw plant at Pata in Madhya Pradesh.