Detailed breakdown of delivered price for D-6 gas

Vol 11, PW 5 (12 Jul 07) Midstream & Downstream

Reliance’s price discovery exercise in May this year established the landed price of D-6 gas at $4.33 per mmbtu.

Like other gas supplies – of domestic or imported LNG – this is the basic price. Other elements like marketing margin, sales tax, transportation costs and service tax are added on before the gas is delivered to customers.

Below is a detailed break-up of the delivered price of D-6 gas in Andhra Pradesh, Maharashtra, and Gujarat and along the HBJ. Andhra Pradesh Maharashtra Gujarat HBJ pipeline Basic price $4.33/mmbtu $4.33/mmbtu $4.33/mmbtu $4.33/mmbtu Marketing margin $0.12/mmbtu $0.12/mmbtu $0.12/mmbtu $0.12/mmbtu Sales tax rate 12% 3% 3% 3% Sales tax $0.52/mmbtu $0.13/mmbtu $0.13/mmbtu $0.13/mmbtu Gas price $4.85/mmbtu $4.46/mmbtu $4.46/mmbtu $4.46/mmbtu Transportation costs Reliance pipeline $0.17/mmbtu $0.93/mmbtu $0.93/mmbtu $0.93/mmbtu GAIL pipeline $0.14/mmbtu $0.30/mmbtu $0.30/mmbtu $0.30/mmbtu Service tax $0.04/mmbtu $0.15/mmbtu $0.15/mmbtu $0.18/mmbtu Total transportation $0.35/mmbtu $1.38/mmbtu $1.38/mmbtu $1.72/mmtbu Delivered price $5.20/mmbtu $5.84/mmbtu $5.84/mmbtu $6.18/mmbtu Reliance’s basic gas price above assumes an exchange rate of Rs45 to one $USD and a Brent crude oil price of $65 per barrel.

In comparison, says Reliance in a June presentation to the oil ministry, most domestic gas and even R-LNG is more expensive. For instance, the basic price of a large portion of gas from the Panna, Mukta and Tapti fields is $4.75/mmtbtu up to March 2008.

Another chunk of PMT gas costs $5.70/mmbtu. Gauri gas from Cairn, says Reliance, costs $3.68/mmbtu; Lakshmi gas, also from Cairn, costs $4.46/mmbtu.

Cairn’s Ravva gas costs $4.40/mmbtu up to March 2008. GSPC’s basic gas price is $5/mmbtu and so is Niko’s Bheema gas.

Niko’s North Surat gas costs $4.46. Only R-LNG from Dahej, at $3.86/mmbtu, is cheaper than D-6 gas.

But this will change to $5.06/mmbtu in 2009 when RasGas revises its price, says Reliance. R-LNG for Dabhol costs $9.20/mmbtu minus pooling with Dahej R-LNG.

On average, says Reliance, “market determined domestic wellhead gas prices range between $4.1 and $5/mmbtu.â€‌ For the power sector, says Reliance, to produce electricity at Rs2.50/KwH, the delivered gas price can vary between $6 and $6.40/mmbtu.

The fertiliser sector can, on the basis of the last three years’ urea prices, afford delivered gas up to $7/mmbtu. If the fertiliser sector uses D-6 gas delivered at $5.8/mmbtu, claims Reliance, Delhi will make major subsidy savings.