Gas talks break down between Tatas and ONGC

Vol 7, PW 26 (24 Mar 04) Midstream & Downstream
     

Talks have broken down between Tata Power and ONGC for natural gas from the C22, C24 and C39 marginal gasfields offshore Mumbai.

After almost a year of negotiations and the exchange of several term-sheets the two companies have decided to call off talks. Reason: disagreement on the burner tip price of natural gas.

After considering all the costs involved the Tatas were offered a final price of $3.62 per mmbtu but they dont want to pay anything more than $3 to $3.2, an ONGC official tells PETROWATCH. There is no point taking these discussions further.

We are tired of exchanging term sheets. Tata Power wanted to sign a 15-year agreement with ONGC to fire its 1,350-MW power station at Trombay near Mumbai.

Another meeting between the two sides is scheduled for April, but neither side is holding out much hope for agreement. Several attempts have been made to make the Tatas understand that development of these fields is economically unviable at their price.

ONGC is perplexed that Tata Power expects it to deliver natural gas at a price that is less than the delivered cost of LNG. When the delivered cost of LNG is about $4.5 per mmbtu on the west coast, how can we sell our gas for a song My gas and its price are based on my calculations and not on the buyers whims and fancies.

ONGC insists that its price is competitive. Our price is much cheaper than the LNG offered by Petronet-LNG, he adds.

Its also inclusive of taxes. ONGC claims it had warned Tata Power that C22, C24 and C39 could produce only about 2.5m cm/d over ten years.

Tata Power wanted to buy 4m cm/d of gas from these marginal fields. Losing Tata Power means ONGC will now look elsewhere for a buyer.

Essar Power, Bharat Petroleum and GAIL are interested in buying gas from these fields. BPCL is desperate to source our gas for their (proposed) gas distribution project in Pune.

When contacted, a Tata Power official confirmed that the company has decided not to pursue negotiations with ONGC. We are not happy with ONGCs offer.

We may source gas or LNG from other quarters.