Pact will ensure smooth supply of gas to power units in Andhra Pradesh

Seeking to end the power woes of Andhra Pradesh and ensuring smooth supply to power plants in the State, GAIL (India) on Thursday entered into a deal with Reliance Industries Ltd. (RIL) for swapping natural gas with imported LNG (liquefied natural gas).

An agreement to this effect was signed on Thursday by GAIL, RIL and power producers in Andhra Pradesh in the presence of Union Petroleum and Natural Gas Minister Jaipal Reddy and representatives of the two companies. Petroleum Secretary S. Sundareshan was present during the signing ceremony. Under the swapping arrangement, GAIL would divert from RIL's eastern offshore KG-D6 fields 2.594 million cubic metres a day of natural gas, which is now being supplied to consumers in western and northern parts of the country, to power plants in Andhra Pradesh, officials said.

The consumers, whose KG-D6 gas allocation would be cut, would be supplied imported LNG but at $4.205 per million British thermal unit (mBtu), the price at which they now get RIL gas.

Power plants in Andhra Pradesh would pay the actual imported cost of LNG, which may be over $10 per mBtu. GAIL at present sells rich-gas, containing LPG, sourced from domestic fields and imported LNG to industries. This is considered an economic waste as the user industries burn the fuel without extracting LPG. The company now wants to first extract LPG at its LPG extraction plants and then sell the gas to industries.

GAIL will use the allocation of 2.594 mscmd from Reliance's Bay of Bengal fields for power plants in Andhra Pradesh and an equivalent volume would be sold to consumers in West and North, they added. KG-D6 gas is now transported from Kakinada on the Andhra Pradesh coast through a 1,395-km long pipeline to Bharuch in Gujarat and then through Hazira-Vijaipur-Jagdishpur and Dahej-Vijaipur pipeline to consumers.

Officials said customers in Andhra Pradesh would enter into contracts for purchase of re-gassified LNG from the LNG terminals at Dahej or Hazira in Gujarat. These consumers would pay the cost of RLNG and the marketing margin. RIL now produces about 51 mscmd of gas from the KG-D6 fields.

Of this, 14 mscmd of gas is sold to fertilizer plants, 24 mscmd to power plants and the remaining 13 mscmd to other sectors such as sponge iron plants, LPG, city gas distribution, petrochemical plants and refineries.

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