Gross Calorific Value tolerance: PD proposes alteration in power plants’ gas turbines

ISLAMABAD: The privatisation process of two RLNG-fired power plants appears to have hit snags as Petroleum Division has proposed alteration in gas turbines of plants for tolerance of Gross Calorific Value (GCV) of gas up to 1150 BTU/SCF for more use of RLNG in place of indigenous gas whose reserves are depleting expeditiously, well informed sources told Business Recorder.

Both Combined Cycle Gas Turbines (CCGG) power plants i.e. Haveli Bahadur Shah Power Plant (gross capacity 1230 MW) and Balloki Power Plant (gross capacity 1223 MW) with RLNG being primary fuel and high-speed diesel (HSD) as backup fuel were established under Power Policy 2015.

Both plants entered into phase of commercial operation in May and July 2018 respectively. For the supply of RLNG as primary fuel, both plants executed Gas Supply Agreements (GSAs) with Sui Northern Gas Pipelines Ltd (SNGPL) on October 29, 2016 for a period of 15 years starting from the commercial operation date (COD).

The GSA(s) also stipulate that GCV of gas supplied by SNGPL to power plants shall not be less than 950 British thermal units per standard cubic feet (BTU/SCF) and shall not be more than 1000 BTU/SCF whereas the plant will not have any obligation to accept this gas subject to the condition that the plant serves immediate notice to SNGPL else the gas supplied shall be deemed to be accepted by the plant.

According to Petroleum Division, import and supply of LNG in Pakistan commenced during last week of March, 2015 and the LNG Sale Purchase Agreement (GPA) for supply of 500 MMCFD was executed between PSO and Qatar Gas carries LNG GCV range of 1025 BTU/SCF to 1075 BTU/SCF. Similarly, the executed contracts of M/s PLL with M/s ENI and M/s Gunvor caries LNG GCV range of 947 BTU/SCF to 1140 BTU/SCE. In addition, the new LNG contract executed between PSO and Qatar Petroleum carries GCV range of 1025 BTU/SCF to 1145 8TU/SCF.

Petroleum Division argues that in the absence of dedicated pipeline to carry RLNG from Port Qasim into SNGPL network, LNG was consumed in SSGCL franchise area whereas SSGCL swapped equivalent volumes of gas to SNGPL from gas fields in its franchise areas. During September 2018, the dedicated pipeline project was commissioned and actual RLNG supply to SNGPL commenced.

Petroleum Division maintained that since the GSA(s) with Balloki and HBS power plants were executed in October, 2016 when SNGPL was receiving indigenous gas in lieu of RLNG, therefore, SNGPL assumed GCV of its system for supply of gas to these plants within the range of 950-1000 BTU/SCF. However, when LNG started to flow with volumes of 900 to 1200 MMCFD consisting of term and spot LNG cargoes along with depletion of gas fields having GCV lower than 950 BTU/SCF, SNGPL started to face issue of high GCV in its system. SNGPL’s indigenous gas supply sources are depleting at a pace of 19 percent per annum and resultantly RLNG with high GCV is likely to replace the depleting indigenous gas.

Petroleum Division has highlighted that the Cabinet Committee on Privatisation (CCoP), in its decision on September 18, 2019 approved transaction structure for privatization of Balloki and HBS power plants under NPPMCL.

During ongoing process of the privatisation of NPPMCL, Central Power Purchase Agency Guaranteed (CPPA-G) came forward with the view that existing 66 percent mandatory power purchase under PPA from these power plants is not sustainable due to country’s annual power production plan and energy requirements.

Considering the request of Power Division CCoE, in its decision on September 18, 2020 and ECC, in its decision of April 14, 2021 approved waiver of 66 percent take-or-pay obligation of RLNG based power plants in terms of RLNG offtake under GSA and power purchase under Power Purchase Agreements (PPA) with effect from January 01, 2022.

According to Petroleum Division, in order to effectuate the said waiver, the amendment in PPA(s) and GSA(s) is required.

During the negotiations of amendment in GSA(s) of Balloki and HBS, SNGPL raised the issue of GCV ceiling of 1000 BTU/SCF considering the depletion of gas fields and replacement of RLNG. NPPMCL considering the issue raised by SNGPL referred the matter to M/s General Electric (GE) who was the sole supplier of 9HA.01 gas turbines (6 in number) of Balloki, HBS and Bhikki power plants in Pakistan, however, GE has taken much time in responding to the matter of change of GCV range from 1000 BTU/SCF to 1150 BTU/SCF having received gas composition from SNGPL. NPPMCL maintains that GE has informally conveyed that in order to revise the GCV limits of power plants, modification in plants is required at the buyer’s cost besides voiding the service warranty period.

The communication between Petroleum Division and Power Division further affirmed that in consideration of options explored by SNGPL regarding the GCV of the gas supply to power plants, Petroleum Division is of the considered view that it does not seem to be rational to tweak entire supply system for reduction of GCV to ensure gas supply in the GCV range of 950 BTU/SCF to 1000 BTU/SCF.

“ It would be more appropriate that NPPMCL may be advised to request M/s General Electric for modification of gas turbines for tolerance of GCV up to 1150 BTU/SCF of power plants. The power plants may seek recovery of the modification cost through tariff,” said Salahuddin Khan, assistant director (Tech) in his letter to Power Division.

“The matter has assumed high significance and urgency in view of Petroleum Division’s efforts to bring more imported gas into the system,” he added. Power Division has been requested to impress upon NPPMCL to urgently prepare plans for modification of gas turbines and further necessary actions which should also be shared with it on top priority.

The sources said, since modification in gas turbines of both power plants, privatisation process, which was already delayed due to Covid-19, would further delay the sell-off process and targets set for budget 2021-22, may not be achieved.

Copyright Business Recorder, 2022