GAIL India has won the rights to market the gas jointly produced by Reliance Industries, British Gas and ONGC from the Panna-Mukta-Tapti fields.
NEW DELHI: State-owned GAIL Ltd appears set to get the marketing rights for the entire natural gas production from the country’s first privatised oil and gas fields — Panna, Mukta and Tapti (PMT).
The government is likely to take away the partial marketing rights granted to a joint venture comprising Reliance Industries Ltd (RIL), BG and Oil and Natural Gas Corporation (ONGC) about three years back.
The joint venture will now have to sell the entire 14-15 million standard cubic metre a day (mscmd) gas to GAIL at a price capped at $5.57-5.73 per million British thermal unit (mBtu) for further marketing.
While the price of gas produced from Tapti is capped at $5.57, that from Panna and Mukta is capped at $5.73. The price at which the gas is to be sold to a government nominee is derived through a formula linked to fuel price.
The decision would benefit GAIL, but would limit the profits of the three operators.
Sources in the joint venture confirmed the news, but said they were yet to receive a formal communication from the ministry of petroleum and natural gas. The capped price is higher than the recently approved $4.33 floor price for RIL’s natural gas produced from D6, though it is about $2-3 lower than the price linked to current international fuel oil prices.
The government decision is a reversal of an earlier ministry decision granting the joint venture partial marketing rights in 2004. “It was a violation of the production sharing contract (PSC) then. The sovereign contract has to prevail unless the PSC is amended,” said an official.
Article 21 of PSC, signed in 1994 between the PMT consortium and the government of India, stipulates that natural gas produced from the PMT fields would be offered to the government or its nominee.
The government in January 1995 nominated GAIL as its nominee.
“Unlike the New Exploration and Licensing Policy, there is no provision of operators being allowed to directly market natural gas themselves,” added the official.
It is not yet clear when the decision would be applicable. The current arrangement under an agreement entered in March 2005 is to expire in March 2008.
“There is no provision for revising the cap and floor ($2.11 per mBtu) in PSC.
The only revision possible was seven years after the signing of agreement and that has already happened in 2005,” said the official.
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