RIL makes fresh fuel offer to NTPC

NEW DELHI: Talks over an out-of-court settlement in the RIL-NTPC gas imbroglio have thrown up some interesting offers from RIL. The company has indicated that it could be willing to offer 12 mmscmd, the committed gas to NTPC, at about $6 per mmbtu. But a rider on this offer is about diverting eight mmscmd of gas to Maharashtra’s Dabhol power project while the balance could be used by NTPC.

Sources indicated that the trigger for exploring an out-of-court settlement has been the worsening power situation in the country. Several power plants in the country, including the Dabhol plant in Maharashtra, are operating below capacity for want of fuel. Government and political pressure has been building up to find a solution to the stalemate over gas supplies since RIL will be entering the market by early 2008 with a significant volume of gas. However, sources said NTPC is not in favour of mixing the gas supply issue with the Dabhol project. Both RIL and NTPC declined to comment on the development. NTPC officials have held that the company is not in a position to comment as the matter is sub judice.

RIL had committed to supply 12 mmscmd of gas after winning a bid as the fuel supplier for NTPC’s Kawas and Gandhar power project. The matter, however, is now in court. Differences had cropped up between RIL and NTPC over clauses in the gas supply agreement.

NTPC, which has now taken up the Dabhol power project as a co-promoter with Gail India, is also trying hard to secure gas supplies for the power project. Maharashtra, which is facing huge power shortfalls, has been lobbying with the Centre to secure fuel supplies to this project, which could provide some relief to the power crisis in the state. It remains to be seen whether NTPC will settle for this gas.

Though the price indicated by RIL ($6 mmbtu) is substantially higher than the committed price quoted by the company at the time of winning the bid ($2.97 per mmbtu), it is significantly lower when compared to that of alternative fuels like LNG from spot markets which come at prices close to $10-$11 per mmbtu.