Mumbai: Petronet LNG will supply 1.5-million tonne liquefied natural gas to Ratnagiri Gas and Power (RGPPL), until September, 2009, at $5.83, per million British thermal unit (MMBTU). The price includes sales tax.

The LNG supply is expected to commence from June 2007, once the Dahej-Uran pipeline has been completed. Petronet will source the LNG for RGPL in 24 spot cargoes. Petronet has signed purchase agreements with Oman, Qatar and Nigerian companies for LNG.

In the meanwhile, RGPPL will have to sign the power purchase agreement with Maharashtra State Power Distribution Company (MahaVitaran) for drawing 2,150 MW.

The power purchase agreement is expected to be signed this week as the empowered group of ministers, which is working on the revival of the Dabhol plant, has approved the fixed cost of electricity from the station at 98 paise.

Based on this, MahaVitaran is expected to pay around Rs3.08the per unit for the power it draws from the plant. It currently draws 343 MW at a higher rate of Rs5.10 a unit for power from Dabhol, which is currently using naphtha as feedstock.

RGPPL, was formed in July 2005, to as a 50:50 joint venture between GAIL and NTPC for taking over the assets of the Dabhol Project. The two public sector units have an approved investment of Rs500 crore each as equity contribution in RGPPL.

The delay in revival has resulted in a cost escalation of Rs 2,594 crore over the original Rs10,303 crore project cost. The government is keen to bring back the project cost to the original figure, which may entail financial measures. 

Due to lack of funding, RGPPL is unable to complete the renovation process now, as the power finance corporation had stopped the release of the committed fund of Rs1,400 crore after the first installment of R350 crore. Thereafter, MSEB Holding had offered Rs450 crore to RGPPL, but did not disburse the funds, delaying the revival of Dabhol's block-I of 670 MW.

However, the new gas price offered by Petronet will help RGPPL at this particular juncture, since the international market price of LNG has been hovering around $8 per MMBTU. Maharashtra will use 95 per cent of the power produced in Dabhol station, while the rest can be sold to other states as per the mega power project policy.