India's NTPC VVN amends gas price formula for 4 GW power tender to include WIM

India-based NTPC Vidyut Vyapar Nigam Ltd.’s amendment of its variable gas price formula to include West India Marker for its 4 GW power sourcing tender is likely to improve market transparency around pricing, market sources told S&P Global Commodity Insights late Feb. 1.

"This is a good development as it leads to more market transparency by reference to a transparent price, which is discoverable to all participants," an India-based gas trader said Feb. 1

Variable charges linked to gas prices, or VCGA, shall be indexed to the monthly gas price, which is communicated by GAIL, a natural gas company, based on the West India Marker if a power supplier is itself arranging gas, according to the tender amendment document uploaded by NVVN, a subsidiary of state-owned electricity producer NTPC, on its website..

However, if the gas is being procured by the power supplier from GAIL, then the latter will indicate a price to NVVN based on the level that is offered by GAIL to the power supplier, the document said.

The power sourcing tender was issued by NVVN in early January for sourcing 4 GW power over March 16-Oct. 31 to meet its requirements.

The power tender is now scheduled to take place on Feb. 6, postponed from Jan. 17 earlier.

The tender comes at a time when global LNG prices have weakened amid healthy inventories in key consuming countries. Previously, when this type of power procurement tender was issued in 2023, it did not lead to a surge in the procurement of LNG cargoes from India.

"We will be able to see how they are using West India Marker in the process, whether they are using the full month price or they are using for that respective half month," a source from a power company said.

"The formula allows for some volatility that can be considered and people have flexibility in sourcing gas," the source added.

Platts assessed WIM, the price reflecting LNG cargoes delivered to West Indian ports, at $9.488/MMBtu on Feb. 1, S&P Global Commodity Insights data showed.

As per the tender document, the tariff payable was covered by a power purchase agreement that has two components -- one consists of variable charges linked to gas prices and the other comprises variable charges that are not linked to gas prices.

In the earlier iteration, the variable gas price formula only considered the gas price communicated by GAIL to NVVN 45 days in advance to the relevant fortnight. Further, such a gas price formula was also applicable to those selected bidders who had arranged gas themselves and did not buy it from GAIL.