Consortium argues that PSC governs Tapti gas price

Vol 8, PW 9 (28 Jul 04) Midstream & Downstream

Unwilling to compromise, the PMT consortium is sticking to its position that the decision to more then double the sale price of Tapti gas to GAIL is firmly in line with the PSC.

This will be its official line in the 27th July meeting with oil secretary Tripathi. GAIL needs to live in the real world if it thinks it can influence changes in the PSC, a source tells us.

But GAIL argues that when the PSC was signed in 1997 it was meekly following government orders to be nominated as the official offtaker of Tapti gas and that the Indian economy was in a shambles when the PSC was signed. It now believes the provision should be changed to reflect new market conditions.

Supporters of GAILs position argue that the Congress government of the day in 1997 (with Satish Sharma as oil minister) agreed to the 150% increase provision in the Tapti PSC under pressure from the disgraced energy major Enron. As for comparison with the Reliance price for KG gas, the PMT consortium is dismissive.

GAIL continues to refer to Reliances NTPC price, a source tells us. But this is irrelevant.

Reliances gas will not be available before 2007. Yet, the consortium offers a glimmer of hope to GAIL by stressing that the Tapti price is a floating price and that if the international fuel oil basket comes down to anywhere between $10 to $15, the Tapti price could also come down to $2 per mmbtu.

Would GAIL seek changes in its floating contracts for LNG with an international supplier adds the consortium. Would they go to Qatar after seven years of signing the contract and say we want a lower price or match it with our domestic gas For the consortium the matter is straightforward: the PSC clearly gives the consortium the right to increase the Tapti gas price from 26th June 2004.

Its all written down in the PSC, says a source. And the government of India is a signatory to this PSC.