Wide gap still between GAIL and PMT consortium

Vol 9, PW 23 (09 Mar 06) Midstream & Downstream

GAIL and the PMT consortium might be close to a price for 5.8m cm/d from 1st April but there persists wide differences over other terms.

Two key differences are over gas volumes and the duration of supply. Both sides continue to meet each other to hammer out a solution.

Will agreement be reached ahead of the 11.30 am meeting with oil secretary Srinivasan in Delhi on 13th March Difficult to say as the gap is too wide, we hear. Eventually some compromise will be struck.

But the price will be most likely around $4.75 per mmbtu. Of the 11m cm/d now produced by PMT, nearly 5m cm/d was contracted in April 2005 for three years to Gujarat State Petroleum, Gujarat Gas and Reliance Industries at $4.08 per mmbtu.

Till 1st April 2005, the entire 11m cm/d was being sold to GAIL as government nominee at $2.11 per mmbtu but disagreement arose over the consortiums demand that the price be increased in line with the PSC. More, the PSC allowed the consortium to market the entire production of 11m cm/d directly from 1st April 2005 in GAIL did not agree to a price rise.

But in response to an oil ministry request, the consortium agreed to sell 5.8m cm/d to GAIL for a year for onward sales to priority power and fertiliser customers along the HBJ. The new price was $3.86 per mmbtu the ceiling of the oil ministrys July 2005 gas pricing order.

Going by the PSC, the ceiling price of Tapti gas is $5.57 and that of Panna-Mukta gas is $5.73 per mmbtu. This one year sale to GAIL was not under the terms of the PSC but under a request from the government, we are reminded.

In January this year, the PMT consortium invited EoIs for 4m cm/d gas out of the 5.8m cm/d expected to be freed from GAILs control on 31st March. On 10th February, eight bids were received.

The winning bid of $4.75 per mmbtu (ex-Hazira, inclusive of royalties but exclusive of taxes) was a clear, unconditional offer as required by the consortium.