LNG terminal, only way out for gas-based plants: G.V.K. Reddy

Long term gas supply contracts with international vendors and setting up of a dedicated LNG terminal in the East coast seems to be the only way out for gas-based power plants, said Dr G.V.K. Reddy, Chairman of GVK group.

Apart from stepping up output from the Krishna-Godavari basin or reallocation of available gas to power plants by prioritising, there is little that the Government can do in the present circumstances.

The gas supplies from the KG Basin have dwindled. There are indications this could come down further. This is not good news for power plants which are functioning at low critical plant load factor, he said.

There are many large producers of gas and there is demand. But fair price and long term is therefore crucial, he felt.

Dr Reddy told Business Line, “For nearly a decade nothing much was done even though there was the plan to set up a LNG terminal and a Malaysian major evinced interest. Everyone was banking on the KG Basin gas. While the supplies were fine, lately, the gas output has come down.”

The GVK group too, had planned to set up an LNG terminal but decided against the move. “Therefore, after investing few hundred crores on expansion of gas plants, we decided to put them off to focus on thermal and hydel projects,” he said.

There are several issues including gas pricing and prioritisation of allocation. Apart from stepping up output, all these have to be resolved before something concrete takes shape, he felt.

All the power projects, which have taken up expansion and nearing completion are gas-starved. Couple of new proposals have come up for LNG terminals, including from GAIL and Petronet. New LNG terminal is still some time away, he explained.

Andhra Pradesh has received two proposals for setting up floating storage processing vessel. Reliance ADAG has also planned a terminal in partnership with Shell.

Of the installed capacity of 2,700 MW in AP, barely 1,400 MW is in operation and that too at about 40 per cent capacity.

Source: Business Line

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