Deora keeps everyone guessing on PMT gas allocation

Vol 11, PW 22 (20 Mar 08) Midstream & Downstream

All eyes are on oil minister Murli Deora as he ponders whether to approve a revised gas allocation formula to carve up supplies of gas from the western offshore Panna, Mukta and Tapti fields after April 1.

Unless Deora approves it, British Gas-owned Gujarat Gas, Reliance-owned Indian Petrochemicals and Torrent Power won’t know if they are to receive gas from the fields after April 1. Late last year the oil ministry controversially and unilaterally decided to reverse a two-year old commitment allowing consortium partners British Gas, ONGC and Reliance to sell to whoever they want with an order that after April 1 they must sell to GAIL only.

“We have not heard anything,â€‌ confirms a consortium source, “beyond that the file is lying on Deora’s desk for the past week.â€‌ Panna, Mukta and Tapti – jointly operated by ONGC (40%), BG (30%) and Reliance (30%) - produce about 18m cm/d gas and 45,000 b/d oil.

GAIL presently receives 6.06m cm/d at three different prices while the rest is sold to IPCL, GSPC and Gujarat Gas, at prices ranging from $4.08 to $5.73 per mmbtu. These supplies were to cease from April 1, but it is believed the ministry has relented in the face of vigorous protests at the arbitrary order and agreed that the PMT consortium could continue supplying 3.6m cm/d to IPCL, 2.13m cm/d to Gujarat Gas and honour a contract for future supplies of 900,000 cm/d to Torrent Power.

No formal announcement has yet been made of this decision, as the file awaits Deora’s approval. Also spared are supplies of 1.5m cm/d to the state-owned electricity provider Rajasthan Rajya Vidyut Nigam.

Deora has a reputation for overruling his bureaucrats so it is unclear if he will approve the new carve-up. Unclear also is how much IPCL, Gujarat Gas or Torrent will pay for PMT gas after April 1, if at all Deora allows supplies to continue.

Similarly unknown is if the supplies will be through GAIL or directly by consortium partners