Government sets up committee for stable gas price for power units: Oil Secretary

The government has set up a committee to work out measures need to make natural gas available to power plants at "reasonably stable prices", Oil Secretary Tarun Kapoor said on Thursday.

India has 24,900 megawatts of gas-based power generation capacity. But of this, 14,305 MW is stranded due to the non-availability of reasonably priced gas.

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"We have set up a committee to look to see how we can make natural gas available to the power sector at a reasonably stable price," he said at ETEnergyworld Gas Conclave.

Without giving details of the panel or its report, he said power plants want fuel at "fairly stable" price as the electricity they produce is priced at uniform or almost static rates.

"If the price of natural gas goes up, power generators cannot increase the price of electricity they produce," he said. "So we are looking at ways and means of how we can increase the penetration of natural gas in the power sector."

The average domestic gas supplied to gas-based power plants is just over 25 million metric standard cubic meters per day (mmscmd), which is 70 per cent short of the allocation or the requirement.

While gas-based power plants act as balancers in the grid, making available gas to power plants is part of a larger plan to increase the share of environment-friendly fuel in India's primary energy basket to 15 per cent by 2030 from the current 6.7 per cent, Kapoor said.

Natural gas as a fuel is convenient to use and can be easily transported through pipelines. It is cleaner than several other fossil fuels.

Of the total gas consumption of about 60 billion cubic meters, more than half or 33 bcm was imported, he said, adding for a nation aiming to become self-reliant in energy, domestic production has to increase.

In absence of sufficient domestic production, India imports gas in form of liquefied natural gas (LNG). However in recent weeks, LNG prices shot up to a record high of USD 56 per million British thermal unit in comparison to USD 5-6 per mmBtu rates prevalent previously, he said adding the prices have gone down to USD 30 but even this rate is extremely unaffordable.

India has some long-term LNG supply contracts, which are indexed to different benchmarks, thereby giving it rates that are much lower than current international prices.

The focus is on exploring more areas to find gas reserves as well as raising output from existing fields, he said adding output is likely to rise next year on the back of major discoveries in the KG basin in the eastern offshore coming to production.

"Total increase expected would be 30 mmscmd. Of this, 18 mmscmd increase has already happened," he said.

The increase was mainly because of newer fields in the KG-D6 block of Reliance Industries Ltd being brought to production.

"We hope domestic production will go up next year also," he said.

The government, he said, is also looking to raise domestic availability by doping bio-gas made from agri and municipal waste.

Bio-gas "should contribute to about 10 per cent of our requirement," he said.

To increase the share of gas in the energy basket, infrastructure - pipelines, import terminals and distribution network - have to be expanded.

The country has about 19,000-km of trunk pipeline network which is being expanded to 35,000 km by 2024-25.

"Difficult part is to get distribution in place," he said referring to the network that has to be set up in cities and towns to take gas to household kitchens and industries.

"There is right of way (right to lay a pipeline) challenges and involve huge investments," he said. Undeterred, the government is creating enabling regulations where anyone - producer, marketer or trader - is able to sell gas and a buyer has a choice of source.

"In order to facilitate easy trading and easy transportation gas, the gas exchange has been made functional. We are also in the process of setting up a TSO so that transportation of gas is not monopolized by anyone," he said.