Financial Daily from THE HINDU group of publications
Wednesday, Feb 22, 2006
Corporate - Corporate Disputes
GAIL notice to BSE Panna-Mukta-Tapti team to approach Oil Ministry
Pratim Ranjan Bose
Kolkata , Feb. 21
THE controversy over supply of natural gas by Panna-Mukta-Tapti (PMT) joint venture (between ONGC, British Gas and Reliance) to GAIL (India) Ltd is unlikely to die down quickly.
The joint venture will soon approach the Union Ministry of Petroleum against a recent notice issued by GAIL in this regard to the stock exchange.
GAIL consumes gas from PMT for supply through the Hazira-Vijaipur-Jagdishpur (HVJ) pipeline.
GAIL had issued a notice to the Bombay Stock Exchange (BSE) on Friday claiming that the company did not anticipate any difficulty in meeting the demand of its customers (mainly from fertiliser and power sector) in the ensuing rabi season as the Union Ministry of Petroleum and Natural Gas had asked the joint venture "to continue supply of six million metric tonne natural gas per day broadly on same terms and conditions" as prevailing.
The company had also informed the BSE that they had made an offer to PMT to lift the joint venture's entire production (close to 11 mmscmd) at market price on long-term basis.
PMT sources, however, described GAIL's claim as "confusing". While admitting that they had received a communication from the Ministry to this effect, it was stated that the joint venture had been allowed to go for direct marketing beginning 2004-05.
"However, keeping in view the consumers on the HVJ pipeline the Ministry "requested us" to supply 6 mmscmd (down from 6.75 mmscmd) to GAIL at an enhanced R-LNG linked price of $3.86 per million metric British thermal unit (mmbtu) for one year. It was an interim arrangement and we did not even enter into a formal gas purchase agreement with GAIL on the same so far," a senior PMT official said.
"While we have nothing against GAIL, it can never be binding on us to supply gas to GAIL at the prevailing terms and conditions," the official said adding, "if at all we are supposed to continue supply at the same terms and conditions as in this fiscal, then why should GAIL offer to pay market price?"
According to sources, the joint venture now intends to tie-up directly with the end-consumers who are free to use the GAIL pipeline.
"We will soon explain our position to the Ministry. We are hopeful that we will be able to convince them," the official said, adding that GAIL had never quoted any offer price for the proposed gas supply.
On the other hand, the joint venture had received firm price commitments of more than $4.5 per mmbtu from other customers.
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