India?s largest thermal power generator NTPC has rejected the petroleum ministry?s proposal to pool gas prices for the power sector, saying this would expose the sector to volatility in the world LNG market. NTPC has given its feedback to the consultation process initiated by the petroleum ministry with key stakeholders, over its proposal for a common pool price for key natural gas consuming sectors like power and fertilisers, following recommendations of a study report commissioned by GAIL India.
The study was undertaken by GAIL?s Italian consultant, Mercados, which submitted its report in February this year. The consultant has suggested pooling spot LNG cargoes with domestic gas to arrive at a common gas price for all customers. The price will be subject to review after every 4-5 years.
While sharing its feedback on the proposal, NTPC has argued that pooling of the domestic gas with spot LNG cargoes will not help in containing the impact of volatile international gas prices. Instead, it could end up adversely impacting the viability of the power sector.
A a time when the availability of APM gas is declining, implementing the proposal could expose the power sector to highly volatile prices of gas, the central utility said.
NTPC has also argued that because of their lower efficiency and higher heat rate, existing power plants will be at disadvantage vis-?-vis new stations and that there will be no incentive for LNG importers or power producers to buy LNG at a competitive price, since every cargo will become part of the pool.
NTPC has also said the petroleum ministry?s proposal to undertake price dis- covery for gas from future Nelp blocks, based on paying capacity of customers in non-regulated sectors, could create high a demand-low availability scenario, resulting in unusually high gas prices.
The implementation of the proposal could also discourage the development of greenfield projects which are set up for a minimum period of 25 years, NTPC has argued. Developers will not be in a position to take an investment decision due to an uncertainty about gas prices for their projects.