Myanmar gas at $4.5 per mmbtu too expensive

Vol 8, PW 8 (14 Jul 04) People & Policy

Indian investment in neighbouring Myanmars gasfields could be at risk following Reliances gas discovery last month offshore Orissa.

Myanmars military junta is not helping by quoting an unreasonable price for the gas it wants to export to India. A four-member GAIL team visited Myanmar late May to discuss gas sourcing from Block A-1 where ONGC Videsh and GAIL together hold 30%.

High on GAILs agenda was to persuade Myanmar authorities to influence Bangladesh to approve the transit of a gas pipeline to India. Equally important was the price of Myanmar gas.

We learn GAIL got a shock when Myanmar quoted a price of $4.5 per mmbtu for its gas. Our top management was aghast, says a GAIL source.

This price is exorbitant. GAIL and ONGC tell us state-run Myanmar Oil and Gas Enterprise is unrealistic in quoting such a price.

More since the price of $4.5 per mmbtu is just the base price of Myanmar gas. Add the cost of pipeline transportation through Bangladesh and it becomes prohibitively expensive compared to whats already on offer.

Both Reliance and Petronet-LNG are quoting a base price of between $2.60 and $2.75 per mmbtu to customers in India. Even if Myanmar had quoted a base price of $3 per mmbtu there could have been scope for negotiations and bargaining, we learn.

But from $4.5 per mmbtu how much will they come down They cant go below $3 per mmbtu. A source in the Indian embassy in (Myanmar capital) Yangon tells this report that Myanmar authorities quoted $4.5 on the mistaken assumption that India is desperate for gas and would buy at any price.

They are out of touch with the market in India. The military junta sees gas as the countrys only major natural resource that will yield substantial money to help it stay in power.

GAIL, however, is conscious that Myanmar will eventually have to offer a reasonable price because, theres no other significant gas market in the region other than India.

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