But they donآ’t dispute the need for a price rise

Vol 10, PW 4 (15 Jun 06) Midstream & Downstream

One piece of good news from the early June talks between GSPC-Niko and its customers is that nobody questioned the basic premise of a price rise for Hazira gas.

We accept that theres going to be a price rise, says a Hazira gas customer. Nevertheless, we understand that GSPC-Nikos proposal to raise the Hazira gas price to $4.05 per thousand cubic feet might not be the final figure for the current year.

This price can be the opening point of negotiations, a consortium source tells this report. On the other hand, another source in the GSPC-Niko consortium says that the proposed new Hazira price is fully justified.

We believe this is the fair market price for the gas when you look at the various sources from which gas is coming into this region. For instance, the price of Panna-Mukta-Tapti gas was increased to $4.75 per mmbtu with effect from 1st April 2006.

If you convert the proposed GSPC-Niko price into mmbtu then it the same as the price of PMT gas, we hear. Then, the price of gas from Cairn Energys Lakshmi and Gauri fields is also similar to that now being proposed by GSPC-Niko.

This is not all. Look at the price that customers are prepared to pay for LNG, we are told.

Granted that the LNG prices of Shell and GAIL are spot prices. We are aware of this.

Customers should note, we are told, that the price were asking for is not necessarily the arithmetical average of the prices in the market. One thing, however, is clear.

Production of Hazira gas will continue to decline. We are looking at various ways to arrest the decline, says our source.

We will try and add new reservoirs but these will most likely be isolated small ones and not big ones. The decline of Hazira gas production, we hear, is inevitable.

We will be able to only slow the decline, not arrest it.