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Ministry to Seek Top Priority for Power Firms in Gas Allocation

  • The power ministry will pitch for top priority in gas allocation to the power sector when a ministerial panel on pricing and commercial utilization of the fuel meets on Friday.In addition, the ministry also wants the empowered group of ministers (eGoM) to divert gas from non-priority sectors such as steel to existing power projects.The fuel is allotted to customers by government in line with the gas utilization policy that prioritizes users: existing fertilizer units rank first, followed by existing power, petrochemical and city gas projects.
  • This translates into preferential access to gas from Reliance Industries Ltd (RIL) Krishna-Godavari (KG) D6 field off India’s east coast at $4.2 per million British thermal unit.“The power sector is of the top-most priority in the country as it is the most important thing for India’s growth. We want existing gas supplies to be distributed in such a manner that the existing projects are not affected,” said a power ministry functionary aware of the ministry’s stance, requesting anonymity.
  • The Association of Power Producers industry lobby, in a meeting with Prime Minister Manmohan Singh’s principal secretary Pulok Chatterji on Wednesday, had asked for preferential allocation and sectoral priority.The lobby group wanted “allocation of APM (administered price mechanism)/pre-Nelp gas (18 million standard cu. m per day, or mscmd) to non-core sectors should be re-allocated to priority sectors”. The group also sought “first priority to be given to power sector followed by fertilizer sector” for all new gas finds in the 12th Five-Year Plan that starts 1 April.
  • Pre-Nelp is gas from blocks which were awarded before the new exploration licencing policy was launched.The eGoM had made a firm allocation of 63.09 mscmd to various sectors in the order of priority. It had allocated natural gas to sectors such as fertilizer, liquefied petroleum gas, power and city gas distribution for home consumption and transport.
  • The meeting comes at a time when the country is facing fuel scarcity and gas production from the D6 field is dipping. According to projections, the current production of around 37 mscmd will dip to 27.6 mscmd in the next fiscal (2012-13), of which 20.2 mscmd will come from the D1 and D3 blocks and 7.4 mscmd from MA fields in KG basin. All these are counted as part of D6 field. Of the 37 mscmd supplied by RIL, the power sector is receiving only 24 mscmd against an agreement signed for 29 mscmd. After the dip in production, the petroleum ministry had asked RIL to reduce supplies to non-core sectors such as steel.“This supply is expected to further come down. We are doing all we can. It’s for eGoM to take a decision,” said another power ministry official who didn’t want to be identified.
  • Gas production may further dip to 22.6 mscmd in 2013-14, according to the Directorate General of Hydrocarbons (DGH). In 2013-14, while D1 and D3 blocks will contribute 14 mscmd, 8.6 mscmd will come from MA fields, making for a total of 22.6 mscmd. These projections have been made on the basis of “revised sales profile of KG-DWN-98/3” block. According to previous estimates, production should have been 80 mscmd by now.

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