India, which has a total installed power generation capacity of 164 gigawatts (GW), aims to raise it to 187 GW by the end of March 2012, a modest target given a 12 percent peak-hour power shortfall that crimps its near 9 percent economic growth.
According to the deal valid May 31, Reliance will supply nearly 2.6 million cubic meters a day (mmscmd) of gas, currently used by customers in Gujarat, to power producers in Andhra Pradesh from Friday, Oil Minister Jaipal Reddy said.
In return, state-run GAIL will transmit an equal amount of liquefied natural gas (LNG) to customers in Gujarat, Reddy said, adding that the move would lead to additional generation of about 600 megawatt of power.
The move to swap gas was considered as Andhra Pradesh did not have pipeline connectivity to LNG plants in Gujarat.
Domestic supply of natural gas has risen significantly after Reliance started pumping from its deep-sea D6 block in Andhra Pradesh in 2009.
Gujarat customers would continue to pay the price of D6 gas, while Andhra Pradesh power utility will pay for imported LNG price. GAIL Chairman B.C. Tripathi said his firm would supply spot LNG to Gujarat based customers. GAIL has signed a deal to import 0.5 million tons of LNG from Marubeni.
India, which imports over two-thirds of the oil it consumes, is actively encouraging the use of natural gas to reduce reliance on costly oil imports.
Andhra Pradesh has gas-based power generation capacity of 2,700 MW but due to inadequate pipeline infrastructure produces only about 1900 MW.
