Growing anger in Gujarat over GAIL charges

Vol 10, PW 5 (29 Jun 06) Midstream & Downstream

Anger is mounting in Gujarat over the amount GAIL charges to provide gas connectivity from the Dahej LNG terminal to rival transporter Gujarat State Petronet.

All R-LNG from Dahej first goes to a GAIL receiving station some 500 metres away and from there it is sent out to customers either through GAILs own Dahej to Bijaipur pipeline or through rival Gujarat Petronets state-wide grid. To provide this connectivity to the Dahej downstream flange, GAIL charges Gujarat Petronet $0.54 per mmbtu (Rs935 per thousand cubic metres) plus 12.5% service tax.

Earlier they used to charge Rs100 per thousand cubic metres, we are told. This was later increased to Rs250 and now they want Rs935 per thousand cubic metres.

Gujarat government sources tell us GAILs demand is unacceptable and unreasonable. GAIL is just 500 metres outside the Dahej terminal, adds a source.

Gujarat Petronets receiving flange is about 100 metres from the terminal and for that GAIL wants 54 cents plus service tax. Gujarat officials tell us Gujarat Petronet is willing to pay a reasonable amount as connectivity charges but not this exorbitant amount, which is the same as the transmission tariff for the Dahej to Bijaipur pipeline.

Gujarat Petronet will be forced to pass on this cost to its customers in addition to its own transportation charges, we hear. Customers will be saddled with double transmission charges: one from GAIL (for transportation over 500 metres) and one from Gujarat Petronet.

Gas will become even more expensive. Hardest hit will be customers in the price-sensitive fertiliser and power sectors.

Why should Gujarat customers pay GAILs unreasonable Dahej connection charges Gujarat authorities also criticise what they say are GAILs double standards on connectivity charges. Gujarat Petronet has a receiving station at Hazira to receive R-LNG from Shell, we are told.

GAIL wants Gujarat Petronet to give free connectivity to Shell, we hear. We are willing to give this if they extend the same privilege to us at Dahej.

Gujarat authorities have taken up the matter with the oil ministry.

GAIL argues it is only following government orders. Contacted by PETROWATCH it says: ?GAIL has raised the issue with the Tariff Commission and the oil ministry expressing that there could be resistance or problems from existing consumers on the DVPL network who were paying the ?Zonal? tariff within Gujarat, which is in the range of Rs250-500/MSCM. Although the Tariff Commission has examined ?distance-related? tariffs, their final recommendation is for ?distance-neutral? tariffs for all consumers regardless of distance. In their report they stated: "Pipeline for gas transportation is one part of the operation of production of gas or import of LNG, its regasification and distribution to consumers. Achieving economies of scale in the integrated operation requires distribution of gas to a large number of consumers including those situated in far off places. Keeping in view the need to balance regional development, the commission recommends ?distance-neutral? tariff.? Further, it is understood that the Inter Ministerial Group (IMG) also agreed the recommendations of the Tariff Commission and GAIL was directed by MOP&NG to implement the tariff as recommended by the Tariff Commission. Therefore, as a transporter, for GAIL it is ?value-neutral?, whether tariff is charged on Zonal basis (?distance-related?) or on a ?postalised? basis (distance-neutral). GAIL is purely implementing the administrative directives of the MOP&NG, which were decided on the recommendations of the Tariff Commission.?

Growing anger in Gujarat over GAIL charges

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