The Hindu Business Line : Cairn India expects higher realisation from gas sales

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Kolkata Feb. 7 The Cairn India-operated Cambay joint venture in CB/OS-2 block in offshore Gujarat is expecting higher realisation from gas sales beginning this year.

The joint venture operates Lakshmi & Gauri fields and will soon be developing the newly discovered Ambe.

The joint venture recently renewed its gas sales agreement with two long-standing customers Gujarat Gas Company Ltd (GGCL) and Gujarat Paguthan Energy Corporation private Ltd (GPEC). Cairn holds 40 per cent in the venture.

According to sources, apart from enhancing the gas price from $4 per million British thermal unit (mmbtu) to over $5 per mmbtu, the renewed contract also revised the promised quantities as well as specifications so that the joint venture need not end up offering heavy discounts on prices.

As per the previous agreement, the two companies together were assured a firm supply of 3.39 million standard cubic metres a day (mmscmd).

Of the total, GGCL was assured of 1.27 mmscmd and GPEC 2.12 mmscmd from the Lakshmi field.

However, as Lakshmi went to a declining phase, the joint venture failed to supply the promised quantities and offered up to 30 per cent discounts for a sizable portion of the total sales.

When contacted, Cairn sources did not confirm the price but admitted that the company "should realise higher revenues" on account of higher gas prices and would not be required to offer any discounts to its customers as both the quantity and quality specifications were revised.

"Further, we have committed to supply gas from Gauri field under the Lakshmi gas sales contract," a Cairn source said. The joint venture is scheduled to take up a four well infill development-drilling programme in Lakshmi and Gauri in the second half of 2007.

The $60 million project, if successful, will add to the existing reserves.

Plans are also afoot to upgrade the oil handling facilities at Gauri to 9,000 barrels of oil equivalent per day. The project is scheduled for completion in the third quarter of 2007.