Gujarat Gas in collision course with GSPC and Niko

Vol 9, PW 11 (08 Sep 05) Midstream & Downstream

Close to half of Nikos 14 customers have agreed to pay the new Hazira gas price backdated from 1st May 2005 till 30th April 2007.

But British Gas-controlled Gujarat Gas is refusing to pay the new price of $3.65 per thousand cubic feet ($3.89 per mmbtu) and insists on paying the old price. Negotiations have so far been unfruitful.

Both sides are trying to wear each other out and see who will blink first, says a source. Gujarat Gas has sent letters to GSPC and Niko questioning the basis of the price rise.

Theyve been telling other customers not to pay the new price either. Until recently GSPC and Niko thought they had a compromise formula for Gujarat Gas but thats no longer the case.

Some innovative solutions were offered but Gujarat Gas turned those down. Matters have now reached stalemate, with both sides repeating their arguments to each other.

Gujarat Gas has two main arguments: If theres a price rise theyll have to pass it on to the end consumer and they are unwilling to do this. Another argument is born out of the Gujarat Gas parent British Gas, which is part of the Panna, Mukta and Tapti consortium.

Gujarat Gas believes it should pay the same price for Hazira gas as GSPC pays for PMT gas. But GSPC thinks the comparison is unfair.

GSPC pays transportation cost of about 17 cents per thousand cubic feet from the ONGC premises at Hazira to the distribution point (also at Hazira). More, being a government company GSPC can not indulge in profiteering.

Gujarat sources cant understand the logic behind the Gujarat Gas refusal to pay the new Niko gas price when it is paying the same price to the PMT consortium. Gujarat Gas buys gas from PMT at $3.48 per thousand cubic feet and pays about 17 cents transportation costs to GAIL.

This adds up to $3.65 per thousand cubic feet, adds a source. This is the same asked for by GSPC and Niko.