Gas-based power plants may find the going tough with the continued drop in gas output from Reliance Industries Ltd-operated Krishna Godavari Basin D6 block.
While the new projects are awaiting the Empowered Group of Ministers' (EGoM) decision on gas allocation, the fall in output from the gas fields has lead to even existing projects operating at sub-optimal levels, sources said. In other words, while the existing projects are starving for gas, it would be interesting to see how newer players will formulate their gas strategy.
These fields are currently producing 37 mmscmd after hitting a peak of 60 mmscmd in end-2009.
In October 2011, the power sector got only 85 per cent of the promised allocation.
Assuming that the fertiliser and liquefied petroleum gas (LPG) demand will be given first priority, power sector could get lesser gas as the output continues to fall. This could also be the reason for the loss in generation from gas projects during October-December 2011, industry observers say.
The CEA data shows that the generation loss due to lower availability of gas in Andhra Pradesh, where the majority of plants are dependent on D6 gas, rose sharply from 213 million units in September 2011 to 448 million units in December 2011.
The units lost accounted for 26 per cent of the units generated in December against 13 per cent in September, 2011.
At promised allocation, the gas project will operate at 75 per cent load factor in Andhra Pradesh. However, fall in output will lead to fall in load factors. This makes it tough for gas plants to recover their fixed costs. There have been instances of projects becoming non-performing assets due to fall in gas output. According to PFC, Konaseema gas project has been classified as a non-performing asset in the December quarter. Non-availability of gas is one of the reasons for the project slipping into NPA.
Feb 14 meeting
Meanwhile, the EGoM, which was expected to meet on February 14 to consider changes in the natural gas allocation policy, may not meet on the scheduled date. According to sources, the Petroleum Ministry has suggested that gas supplies to power producers that do not sell electricity at regulated tariff be stopped, and allocation to a few merchant power plants in Andhra Pradesh that currently sell electricity at higher tariff be cancelled.
Also, it proposes to make future gas allocations to urea plants only.