The combine is planning to market natural gas itself to alternative markets as GAIL refused to hike gas prices.

Our Bureau

New Delhi, Feb. 8

THE Government has asked British Gas, Oil and Natural Gas Corporation and Reliance Industries, the joint owners of the offshore Panna/Mukta and Tapti oil and gas fields, not to cut gas supplies to existing power and fertiliser consumers.

The BG-ONGC-RIL combine is planning to market natural gas itself to alternative markets as gas transporter and marketer GAIL (India) Ltd refused to hike gas prices.

"We have told BG-ONGC-RIL that they can negotiate a price with the existing power and fertiliser units and use GAIL pipeline infrastructure to sell gas directly.

"Alternatively, they can continue to sell gas to GAIL at a negotiated price," the Petroleum Secretary, Mr Sushil C. Tripathi, told reporters here.

"But, gas supplies to power and fertiliser units must not be cut," he said.

Currently, GAIL buys 11 million standard cubic meters per day of gas produced at Panna/Mukta and Tapti fields at $3.11 (Rs 137) per million British thermal units (mbtu) and retails it to consumers, mostly power and fertiliser plants.

The gas producers now want this cap to be raised to $5.6 per mbtu.

"We are not seeking to raise the price to $5.6 per mbtu. That will be the ceiling price.

"All we are saying is that the gas price be raised to market levels so as to compensate us for the huge investment planned in enhancing production from the fields," the ONGC Chairman, Mr Subir Raha, said.

Mr Tripathi agreed with the consortium's demand for raising gas prices. "We have told them to negotiate with GAIL a new price by March 31," he said. BG-ONGC-RIL, which is investing $750 million in increasing output from Panna/Mukta and Tapti fields, want to use GAIL's Hazira-Vijaipur-Jagdishpur(HVJ) pipeline network to sell gas to consumers themselves, Mr Raha said.

Several customers, including Gujarat State Petroleum Corporation, have approached ONGC-BG-RIL to buy the gas directly at market price, which ranges between $4.1 and $4.5 per mbtu.

GAIL, however, is of the view that any price higher than $3.11 per mbtu was not "affordable" to consumers.

It has warned that the move of the joint operators to sell gas directly to alternative markets "would deprive power and fertiliser plants set up along HVJ system of this scarce commodity."

The diversion of gas would reduce gas-based power generation by over 2,000 MW or cut domestic fertiliser production by over 5.5 million tonnes per annum, it has stated.

The Panna/Mukta fields arelocated about 95 km northwest of Mumbai. in water depths of 45 to 70 meters.

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. The offshore Tapti contract area lies 160 km northwest of Mumbai and comprises the South and Mid-Tapti gas fields. Tapti has estimated gas in place of 3.75 tcf (trillion cubic feet).

The Panna/Mukta and Tapti fields are jointly held by BG (30 per cent), ONGC (40 per cent) and Reliance Industries (30 per cent).

(This article was published in the Business Line print edition dated February 9, 2005)
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