GAIL to buy â€کC-Series' gas from ONGC at $5.5/mmbtu

Vol 12, PW 18 (12 Feb 09) Midstream & Downstream

GAIL will buy gas from ONGC’s offshore â€کC-Series’ fields that were once considered marginal because of price caps, but are now viable, at rates approaching the benchmark price for gas supplies from the nearby Panna, Mukta and Tapti fields.

PETROWATCH learns that industrial and commercial gas consumers near Mumbai can expect GAIL to make available an extra 3m cm/d â€کC-Series’ gas by the end of April this year. GAIL will pay $5.5/mmbtu in a five-year contract, a price that will be re-negotiated in the third year and is now just 23 cents lower than PMT gas supplies.

“The agreement took a year of tough negotiations and there are still a few minor unresolved issues,â€‌ confirms an ONGC source. “We offered a five-year contract because that’s the initial plateau period we estimate for â€کC-Series’ gas.

But as we get data during the production period we’ll have a better idea of how long the field will continue producing.â€‌ An initial, but unreliable, estimate, we are told, is that â€کC-Series’ gas could last 11 years.

“But we don’t want to commit that in a contract right away unless we have data,â€‌ adds ONGC. Eight small pools of gas lying under 25 to 30 metre water depths make up the â€کC-Series’ fields.

Initial production for about a year will be from the C-39 and C-22 fields within the â€کC-Series’ and range between 1.5m to 1.8m cm/d, ramping up to 3m cm/d “when the other six fields are also hooked up, maybe in less than a year’s time.â€‌ â€کC-Series’ gas will be transported by pipeline to the NQO platform at Mumbai High North and then by a 185-km-long pipeline to the Uran gas receiving station on the outskirts of Mumbai.

Development of the fields, we hear, will cost ONGC Rs1790cr ($397m). Gas from the Panna, Mukta and Tapti consortium of Reliance, ONGC and BG sells at $5.73/mmbtu, while the price for gas from Reliance’s soon-to-be producing D6 eastern offshore field is expected to be $4.20/mmbtu at landfall.