ONGC challenges GAIL's gas marketing monopoly

Vol 6, PW 14 (11 Sep 02) Midstream & Downstream

ONGC WANTS TO strip GAIL of its gas marketing monopoly and has sent Shastri Bhawan a forceful request to be allowed to directly market gas from its small and isolated fields.

PETROWATCH learns ONGC has built up a compelling case. "GAIL has been apathetic towards our small and isolated fields," complains an ONGC proposal.

"They have marketing rights for all our gas but no obligations. GAIL sees gas marketing as opportunities for pipeline development and markets our gas only when customers are willing to pay arbitrary transportation charges." In 1997, and after much lobbying with Shastri Bhawan, ONGC won direct marketing rights for gas from its small and isolated fields.

"We were able to reduce flaring by about 270,000 cm/d and have been earning Rs18cr ($3.75m) a year additional revenue since 1998." But Shastri Bhawan overturned this arrangement in 2001 - at GAIL's insistence. ONGC now must offer gas from its marginal fields to GAIL and can market it directly only if GAIL fails to identify customers within four months.

"Between June and December 2001 we gave GAIL a list of small and isolated gas pools. But they brought proposals (before the Gas Linkage Committee) for allocation only in May 2002.

During all this period gas was being flared." ONGC now feels its arrangement with GAIL is a waste of time and money. "GAIL cannot add value but wants to be present in our gas chain," adds the proposal.

"Forget our economic interests, customers have to bear the burden of making GAIL's pipeline investments viable."