Objection to HPCL demand for آ‘take-or-payآ’ contract

Vol 8, PW 1 (07 Apr 04) Midstream & Downstream

Another point of contention between Reliance and HPCL centres on the type of contract for the Mundra to Delhi pipeline.

HPCL insists on a take-or-pay contract for the common carrier capacity but Reliance wants, any other mutually agreeable contract other than take-or-pay for the firm requirement but not forming part of the 25% capacity available on common carrier basis. Yet, HPCL is adamant.

Reliance has to sign a take-or-pay contract, reveals a company source. Otherwise it makes no sense for us to reserve excess capacity for them.

A source points out that HPCLs terms are broadly in line with oil ministry guidelines and, embarrassingly for Reliance, very similar to those set out by Reliance itself in the six cross-country product pipelines it plans to lay. Late February, HPCL sent Reliance a point-by-point clarification.

HPCL tells Reliance that the Mundra to Delhi pipeline route provides for tap off points at regular intervals, at Palanpur, Ajmer, Jaipur, Rewari, Bahadurgarh, from where products from the proposed pipeline manifold flange joint can be delivered to interested customers. Writes HPCL: It is not possible to provide any further tap off points for delivery of products at any other locations.

Also, receipt from the above tap off points, storage of products including interface and further transportation need to be looked after by the respective customers. Reliance is also told that the, methodology for allocation of capacity offered on a common carrier basis will follow guidelines (if any) from the government or the (future) regulator.

For itself, HPCL wants capacity allocated in such a manner that it yields, maximum possible revenue backed with appropriate take-or-pay agreements. If Reliance agrees, HPCL offers to, undertake responsibility for delivery ex our flange joint on the common product discharge manifold within our tap off installation at a maximum pressure of between 1.0 and 2.0 kg/sq cm.

HPCL adds that customers would, need to design their facilities to receive products into their own installations including acceptance of interface that will be generated during transportation.