Press Releases

[New Delhi, May 6, 2005]

Supply of Natural Gas to Independent Power Producers in the K.G. Basin area in Andhra Pradesh
(Sl. No. ND/CC/05/41)

Over the past few days, the supply of natural gas to M/s GVK Industries, Konaseema Power, Gauthami Power and Vemagiri Power, all Independent Power Producers (IPPs) in Andhra Pradesh have been receiving a lot of attention in the media. We wish to clarify the following two queries which are being asked:-

1) Why is gas not available to these IPPs as per their requirement?

These IPPs were given allocations between 1999-2001 by the Gas Linkage Committee, an Inter-ministerial Committee comprising members from the Ministry of Petroleum & Natural Gas, Ministry of Power, Ministry of Fertilizer, Ministry of Steel, Department of Chemicals and Petrochemicals, Ministry of Finance and the Planning Commission. This Committee after taking into account the availability projections given by the producers, gave allocations of APM gas to above IPPs

Unfortunately, the availability of natural gas in the K.G. Basin from ONGC has come down by 17% between 2002-2003 and 2004-2005. Similarly, the gas supply by the JV operators of Ravva Satellite fields has also come down by 5% during the same period. In line with the decision taken by Ministry of Petroleum & Natural gas in December 2004, the current availability of 7 MMSCMD will be supplied on a pro rata basis among all the consumers having firm allocations in the K.G. Basin area including the new IPPs mentioned above.

2) What is the role of GAIL as a fuel supply manager?

Anticipating the shortage of Natural Gas in the K.G. Basin area, GAIL, as early as, in 1999-2000, had proposed an LNG terminal at Kakinada. Further, in November 2002, the Ministry of Petroleum & Natural Gas decided that the terminal would be constructed by IOC. The proposed LNG terminal at Kakinada has not progressed. Had it been there, there would have been much greater availability of gas to meet the entire demand of the area.

As a matter of abundant precaution, GAIL in its agreement with IPPs had a clear provision requiring the IPPs to make arrangements for alternative fuel to supplement their gas supplies in case of any possible shortage in gas availability.

Currently, we are in dialogue with MoP&NG, ONGC as well as the JV operators in Ravva Satellite fields to step up their production till such time the major discoveries in the K.G. Basin area materialize.

GAIL is going ahead with the creation of new pipe line infrastructure to meet the schedule of commencement of gas supply to the new IPPs even though as a pro rata share of the existing availability of natural gas.