Pratim Ranjan Bose

Kolkata, Jan. 24

ONGC is expected to record a "major increase" in prices for long-term supply of C2/C3 (methane-propane) rich gas to Reliance Industries-controlled Indian Petrochemicals Corporation Ltd (IPCL).

While the formal agreement is yet to be struck, according to sources, IPCL is agreeable to pay $4.6 per million British thermal unit for C2 supplies from its Uran processing plant.

The C3 supplies, also from Uran, will be made at international prices linked to Platt pricing index of Saudi Aramco.

An internationally traded commodity, C3 generally records higher prices than C2. While methane is generally used for thermal power generation, propane is mixed with butane for producing LPG. Both C2 and C3 are described as rich derivatives, extracted from natural gas.

While RIL group official sources did not respond to queries from

Business Line

, ONGC sources said that the new long-term contract would be effective April 1, following the expiry of the existing contract on March 31. As per the existing contract, ONGC does not charge separate prices for C2 and C3. The price for the bundled offer works out to be Rs 14,082.33 per tonne for supply of 580 tonnes of C2/C3 a day.

Though the net gain to ONGC could not be worked out, a senior ONGC official said that "overall, the new pricing arrangement is substantially higher than the existing ones."

The gain will be especially higher for C3, which will henceforth be linked to international prices.

On their part, IPCL forced ONGC to improve upon the profile (calorific value) of the supplies. ONGC had also assured IPCL on maintaining the supply at the agreed level, irrespective of the projected fall in Mumbai High output.

As an ageing field, Mumbai High output is subject to natural decline; ONGC is trying to enhance the life of the field using various enhanced oil recovery schemes, and has decided to develop three marginal fields (C-22, C-24 and C39) to step up the production of C2/C3 at Uran.

(This article was published in the Business Line print edition dated January 25, 2006)
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