Niko and GSPC agree Hazira gas price with customers

Vol 10, PW 8 (10 Aug 06) Midstream & Downstream

Gujarat State Petroleum and Niko Resources have reached agreement with customers over a proposed 10% price rise for gas from their Hazira field.

PETROWATCH learns this is the outcome of several rounds of negotiations and exchanges of letters. Sometime last week, Nikos India chief Larry Fisher wrote to customers on behalf of the Hazira consortium, listing the areas where agreement has been reached.

Information with this report suggests that GSPC and Niko have got customers to agree to their May proposal to increase the gas price from $3.65 per thousand cubic feet to $4.05 till 31st March 2007. However, customers have extracted a fixed price commitment from GSPC-Niko even after 31st March 2007.

In its original proposal, GSPC-Niko wanted to leave the gas price after 31st March 2007 open-ended and market-determined. Now, we hear, GSPC-Niko has agreed to charge $4.5 per thousand cubic feet from 1st April 2007 till 31st March 2008.

And during 1st April 2008 to 31st March 2009 the Hazira gas price will be $5 per thousand cubic feet. After that the price will be market determined.

Hazira customers are satisfied with this outcome. This will give some stability to the gas price and our end prices for a reasonable period of time, says a customer.

Most satisfied, we hear, is Adani Energy, which buys Hazira gas for onward sales as CNG for vehicles and piped natural gas for domestic households in Ahmedabad. Adani is happy as they will have an idea what kind of CNG prices to charge their customers over this period of time, we are told.

The only issue pending between Adani and GSPC-Niko is the effective date of the price rise. GSPC-Niko want the price rise to be backdated from 1st May but Adani is insisting that the rise be effective from 1st July.

Adani argues theyll lose a lot of money if the price rise is made retrospective from 1st May. They say theres no way they can ask auto-rickshaw and bus drivers to come back and pay the difference.