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RIL may tap BSES synergies for gas projects

Hemangi Balse & N Mahalakshmi in Mumbai

Reliance Industries Ltd is planning to tap the synergies with the power utility company BSES, in which it has a 42.3 per cent holding, following its gas strike in the Krishna-Godavari exploratory block off Andhra Pradesh coast.

BSES would explore setting up gas-based power projects with gas from the Reliance blocks as fuel.

The power utility is already planning to spruce up its activities to enter power distribution throughout the country till 2004, as and when the state electricity boards are privatised, the year when Reliance commences commercial production of gas from its wells drilled in the D6 deep-water exploratory blocks.

Till 2004, BSES is expected to be busy lapping up SEBs in various southern states which are power-starved.

This will also give Reliance the leeway to set up pipelines to transport gas from its exploratory block to customers in the south.

Though Reliance has chalked out a Rs 7,000 crore (Rs 70 billion) investment in the first three years to extract gas from the D6 block, it has plans for an additional investment of Rs 1,000-1,500 crore (Rs 10-15 billion) in setting up gas pipelines, sources said.

"With the government planning to up the ante in privatising distribution and ready availability of gas, the power dynamics will change," sources said.

BSES can be a major player in the south with its gas distribution and generation in place, sources add.

For BSES there will be no urgency to set up power generation plants. In fact, the BSES Kerala Power has suspended operations at its 165-mw plant from October 11, 2001, due to payment problems with the Kerala State Electricity Board.

BKPL has already signed power purchase agreement with KSEB, while the escrow mechanism and other payment comforts have not been put in place by KSEB.

Besides, the power plant in Kerala, BSES is also setting up the gas-based BSES Andhra Power project.

RIL's exploratory block has "on place" 7 trillion cubic feet of gas and recoverable gas of 5 trillion cubic feet.

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