GAIL accused of breaching D6 gas allocation conditions

Vol 16, PW 7 (18 Oct 12) People & Policy

GAIL stands accused of taking cheap D6 gas from Reliance to sell on at an enormous profit, in breach of government allocation guidelines.

Angry power sector customers, desperate for gas tell PETROWATCH on condition of anonymity they want the oil ministry to strip GAIL of its D6 gas allocation bought at the government-regulated price of $4.20/mmbtu. They say GAIL was allocated 2.59m cm/d of D6 gas even before first supplies from the field began in April 2009; ONGC was likewise allocated 410,000 cm/d.

These supplies were meant for LPG production but a source alleges GAIL has not produced any additional LPG. Worse, he says GAIL is clandestinely selling the gas to desperate companies at high spot R-LNG prices of around $15/mmbtu.

For evidence, he offers GAIL’s largely static LPG production figures. In 2008-09, before gas flowed from KG-D6, GAIL produced 1.09m t/y of LPG.

From September 2009, it began receiving 2.59m cm/d of D6 gas and its LPG production in the same fiscal increased marginally to just 1.10m t/y. Worse, in the following fiscal, production dropped - to 1.07m t/y - before rising again slightly to 1.12m t/y in 2011-12.

“GAIL produces 3000 tonnes/day of LPG,” we hear. “But with 2.59m cm/d of D6 gas it should be producing another 5000 tonnes/day.

” Experts tell us D6 gas is anyhow unsuitable for LPG production as it lacks C3 and C4 fractions. “GAIL is re-selling this gas in breach of government guidelines,” he adds, “and re-selling it at spot R-LNG rates to customers without domestic gas allocations.

” When contacted, GAIL confirmed it is receiving its full D6 gas allocation of 2.59m cm/d, but failed to revert on the specific question of whether it is used for LPG production.