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Development of Natural Gas Market Wrt to Power Sector

Development of Natural Gas Market Wrt to Power Sector

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Published by: rathneshkumar on Nov 22, 2009
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In india 
India is the 6th largest producer of electricity after US, China. The electricity produced inIndia is produced by using various alternative methods like coal-fired plant, Gas-fired plants, nuclear plants, hydro etc. According to the predictions India will need to add over 150,000 MW of additional installed power generation capacity by 2025. Gas is predictedto account for about 20% of generation capacity in 2025, up from its current share of 10%. According to India’s Hydrocarbon Vision 2025 this would translate into a gasdemand for power generation between 56 bcm/y and 76 bcm/y, depending primarily ongas prices, varying between $ 3 to $ 4 mmbtu. The power sector would account for about50 percent of total gas consumption. In 2005 all of India’s gas-fired power plantsrequired 17bcm/y to operate at a plant load factor of 90%. Other gas demand projections,including those made in the IEA’s World Energy Outlook, are considerably moreconservative. The differences reflect the extent to which price sensitivity of demand andgas availability were taken into consideration.
The per capita Power consumption in India is increasing manifolds since Independence,due to various factors like rapid industrialization and factors like Rural electrificationunder “Rajiv Gandhi Grameen Vidyutikaran Yojna”. Since independence over 500,000Villages are electrified but we still have lot to achieve. According to CEA 81% of thevillages have been electrified till 31.05.07.Coal accounts for over 70% usage as a fuel for power generation. But due to climaticconstraints and Kyoto Protocol considerations other fuel should be considered such asnatural gas that not only have high calorific value but also environment friendly and willalso help in gaining carbon credits, which will be the another source of income for power generating companies. Huge gas finds have been announced in KG basin and Cauvery basin. Currently, India meets 70% of its energy requirements through imports. But asthere are new natural gas reserves are found by RIL whose production is expected to startin mid-2008 which is estimated to produce 80mmscmd and one of the biggest and mostsignificant discoveries of natural gas by GSPC whose production is expected to start in2009, which is estimated to produce 65million to 70 million standard cubic meters. Itseems that natural gas will be price at market rates. This has left a cause of concern for the power ministry.
The risen prices are creating conflicts between power producers, Gas producers and the government. Power producer demanding less prices or high subsidy,and the natural gas producers are demanding high prices. As stated by the India’sMinistry of Petroleum that the country will have surplus natural gas in two years and itsrapidly growing economy is likely to be fueled by it after major discoveries by state-runand private energy companies.The cost of power from any plant has three major components: (a) capacity cost of plant,(b) the cost of transmission, including the losses in transmission, and (c) the fuel cost.
The cost of fuel should not be considered in isolation instead overall view should betaken cost of electricity also include other factors than fuel which should also beconsidered like transmission and distribution losses, asset losses, operational losses. InIndia, average T & D (Transmission & Distribution) losses; have been officially indicatedas 23 percent of the electricity generated. However, as per sample studies carried out byindependent agencies including TERI, these losses have been estimated to be as high as50 percent in some states.
Chapter 1 – Introduction1.1Background
History of Natural Gas1.1.2 Development
of Natural Gas PricingMethodology in India1.1.3Taxes and duties

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