NEW DELHI: With LNG (liquefied natural gas) prices hardening in global markets, Dabhol plant power will cost more when the project resumes operation in July next.

According to current estimates, the tariff is likely to be higher by about 20 per cent at Rs. 2.50-2.75 a unit (kilowatt-hour) as against the earlier expectation of Rs. 2.30. GAIL (India) Ltd., which has teamed up with the National Thermal Power Corporation (NTPC) to restart the project in Maharashtra, is of the view that the price of LNG, to be used as fuel feedstock for the Dabhol plant, will be about $4.5-5 per million British thermal unit (mBtu), up from $3.65 per mBtu estimated earlier. Accordingly, the power tariff will also increase.

In a presentation to the empowered Group of Ministers (eGoM) early this month, GAIL pointed out that the cost of crude increased to $60 from $34 a barrel when the restructuring process was initiated for the Dabhol project. In keeping with the high oil prices, "the LNG market is presently very tight and is expected to ease only from 2009 onwards," GAIL said.

So far, LNG supplies have been tied up with Qatar for the first phase (740 MW) of the project at a price that will enable sale of power at a final tariff of about Rs. 2.50 a unit. Ratnagiri Gas and Power Pvt Ltd, a special-purpose vehicle set up by GAIL and NTPC for restarting the project, is to import 0.64 million tonnes per annum (mmtpa) of LNG in 2006. It will increase to about 2.83 mmtpa in 2007.

The Dabhol plant, on completion of its 1,444-MW second phase, will require 2.1 mmtpa of LNG. The balance of 2.9 mmtpa is to be used for merchant sale, as planned earlier.

GAIL proposes to complete the unfinished work on the LNG terminal in about 12 months from the date the plant is taken possession of. According to sources, the eGoM, chaired by Defence Minister Pranab Mukherjee, has reached a broad understanding on the power purchase agreement between Ratnagiri Gas & Power and the Maharashtra State Electricity Board. But the accord can be signed only after the gas (fuel) supply agreement is finalised.

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