Niko offers customers Hazira gas at $3.89 per mmbtu

Vol 9, PW 11 (08 Sep 05) Midstream & Downstream

Gujarat Petroleum and Niko Resources are taking note of customer resistance to plans for a one-off sharp hike in the gas price from Hazira.

Instead, customers will now see a gentler rise over a longer period. A source tells this report that the new formula is a compromise between the original proposal from the consortium and customer demands.

About 50% of customers have agreed to the new formula and have already signed fresh contracts, we learn. According to the new formula, Nikos basic gas price is $3.89 ($3.65 per thousand cubic feet) per mmbtu against the earlier price of $3.68 per mmbtu proposed by the consortium.

Also, as Niko wanted, the price rise will be backdated to 1st May 2005. But, as demanded by several customers, this new price will be effective until April 2007, and not for one year, as GSPC and Niko originally wanted.

The new price will be ex-Hazira and does not include transportation costs and taxes, we are told. Transportation costs will be levied in line with Gujarat Petronets distance-based tariff under which customers nearest to Hazira will be charged the least unlike customers farthest from Hazira.

After the two-year period runs out, many existing contracts will expire. The contracts that do not expire will be renegotiated at the market price that will prevail then.

We are told that GSPC and Niko are slowly convincing customers to accept the new formula. They are signing one amended contract every month.

GSPC and Niko have 14 customers for Hazira gas. Contracts with these customers allow for a price review from October last year.

Weve let seven months go by and that is time enough for customers, says a Gujarat source. All customers knew well in advance that a price rise was inevitable,