Financial Daily from THE HINDU group of publications
Wednesday, Mar 02, 2005
Industry & Economy
Panna, Mukta: Operators can sell gas directly to users
Mumbai , March 1
THE Union Government has permitted Oil and Natural Gas Corporation, British Gas and Reliance Industries, partners in the Panna, Mukta and Tapti oil and gas fields, to sell the entire gas produced at these fields directly to consumers.
According to a senior official working with the joint venture, the companies have been given the go-ahead to negotiate directly without going through transmission company GAIL (India) Ltd, if they choose to do so. So far, the combine has sold its 11 million standard cubic metres a day (scmpd) gas volumes through Government-owned GAIL.
Six million scmpd of this gas is reserved for power and fertiliser consumers situated along the 2,700-km Hazira-Bijapur-Jagdishpur pipeline, which is operated by GAIL. The Government has asked GAIL to provide the joint venture a list of these power and fertiliser consumers.
As for the rest 5 million scmpd, the joint venture has the freedom to sell it directly or can use it for their own use.
The decision is a fall-out of the joint venture's differences with GAIL after it resisted paying the market price for the Panna, Mukta, Tapti gas.
GAIL had said that raising prices would harm fertiliser and power producers along its H-B-J trunk pipeline.
GAIL had lobbied with the Government to retain gas prices at $3.11 per million British thermal units (MBTU). The companies cite a provision in the licence for the fields that allows them to raise the cap to $5.57 per MBTU.
GAIL has now agreed to buy gas from the joint venture at $3.6 per MBTU, the official said. But the venture would like to sell gas at the current market price of $3.94 per MBTU. The price of LNG imported at Petronet's Dahej is around $3.87 per MBTU.
According to the official, the combine does not intend to raise prices to more $5 per MBTU. But differences arose after GAIL declined to enforce the provision that allowed the companies to fix their own prices.
The partners claim there are customers even power and fertiliser companies that are willing pay the market prices of close to $4 per MBTU.
The Union Government intervened to allow continued supplies of 6 million scmpd gas to power and fertiliser consumers along H-B-J at current tariff for another year till GAIL can arrange other sources of supply.
The Panna field is estimated to have original in place oil of 1 billion barrel and original gas in place of 1.9 trillion cubic feet. Tapti lies 160 km northwest of Mumbai offshore and has estimated gas in place of 3.75 trillion cubic feet. ONGC holds 40 per cent while BG and RIL hold 30 per cent each in the Panna, Mukta and Tapti fields.
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