The Hindu Business Line : Supply us with maximum quantity of gas, GAIL tells exploration cos

State-owned gas transmission and marketing company, GAIL (India) Ltd has asked the oil and gas exploration companies such as ONGC, Reliance Industries, and Gujarat State Petroleum Corp, to earmark maximum quantity of natural gas from the eastern coast to it.

The company, according to sources, has communicated that it is better placed to monetise the new gas finds from K-G Basin offshore area at market related price prevailing in the region because of its existing gas pipeline infrastructure and experience in marketing of natural gas.

Market price to stay

Monetisation of gas means that whatever gas comes out from that area GAIL should be allowed to commercially market it, sources explained. Customers today have gradually realised that market related price of natural gas has come to stay and the regime of administered pricing mechanism (APM) is on its way out, sources told Business Line.

Customers in K-G Basin are already paying landfall price of gas up to $3.3 per million British thermal Unit (mmBtu) and future gas in the region is being negotiated at $3.5 per mmBtu. The market related price from Panna-Mukta-Tapti (PMT) as fed to Hazira-Vijaipur-Jagdishpur (HVJ) pipeline system is bench marked at $4.75 per mmBtu.

Out of about 6,000 km of trunk gas pipeline, GAIL has created over 800 km of gas pipeline from various sources in K-G Basin for supply to number of existing power and fertiliser plants and also host of small and medium industrial units.

Supply to existing power and fertiliser plants with respect to their commitment is hardly in the range of 64 per cent and 68 per cent respectively. Even though allocation of gas to such customers is in the range of 17 million standard cubic metres per day (MMSCMD), supply is hardly around 6.5 MMSCMD, sources added.

Besides, four new independent power producers (IPPs) have already created their facilities and are waiting for gas supply. Such customers, therefore, would welcome market related price of gas to not only utilise their plant capabilities but also to generate much needed power to meet its demand, sources added. GAIL has also written to the Petroleum Ministry and Directorate-General of Hydrocarbons (DGH) on the issue.

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