Gas-based power plants want relaxed bidding norms for ONGC tender

ONGC wants security deposit equivalent to two weeks of gas cost, and for an entity vying for 1.5 mscmd the deposit will be more than `23 crore, which APP claims is not viable for stressed power plants

Severely stressed gas-based power plants wants the government to relax the norms to bid for fuel from state-run Oil and Natural Gas Corporation’s (ONGC) KG-DWN-98/2 field located off shore in the east coast. ONGC has recently floated the tender for prospective buyers to bid for two million standard cubic meters per day (mscmd) gas from the field.

In a letter written to the secretary of the Union petroleum and natural gas ministry, the Association of Power Producers (APP) has requested the government to reduce the security deposit amount to under Rs 2 crore, include an option to bid for gas for a one year tenure against the 3-5 year period sought by ONGC. APP also wants the relaxation of the financial criteria for eligible bidders. Stating that most gas-based power plants are stranded for unavailability of the fuel, most plants will not meet the net-worth criteria.

“Under such circumstances, the turnover and net worth of parent/ultimate parent/holding company, as well as affiliates and associate companies should be allowed for meeting the criteria,” the letter, reviewed by FE stated. As much as 24,900 megawatt of gas-based power stations operated at only 23.4% utilisation levels in the FY21 for lack of fuel supply. Around 12,000 MW of gas plants are stressed assets, 5,600 GW have had no gas supplied to them in FY20, while the rest had limited supplies.

ONGC wants security deposit equivalent to two weeks of gas cost, and for an entity vying for 1.5 mscmd the deposit will be more than Rs 23 crore, which APP claims is not viable for stressed power plants. As FE reported earlier, gas-based power plants have sought a “separate bucket for allocation/auction of gas” from the government for fuel produced from the offshore fields on the eastern coast of the country.

The ONGC field, which started production in March 2020, is expected to touch the peak production of 15 mscmd by FY24. The ultra-deep-water gas fields located nearby in the KG D6 Block of the Krishna Godavari basin, developed by Reliance Industries (RIL) and BP, are expected to cumulatively produce 30 mscmd by 2023.

Though these fields have been given considerable pricing and marketing freedom, the gas prices are to be capped under the government determined tariff limits. The current price cap is set at $3.62/million British thermal units (mBtu). To make gas-based power commercially viable, the cost of the fuel at burner tip — including transportation costs and taxes — should not be more than $6/mbtu.