Pandian to umpire consortium dispute with Adani

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

Some might think its a conflict of interest but others clearly dont.

DJ Pandian, managing director of Gujarat Petroleum, and Nikos partner at the Hazira gasfield, has been appointed informal arbiter in the price hike row between the consortium and one of its customers: Adani Energy. Still in dispute is the effective date for the price rise of Hazira gas.

GSPC-Niko wants to backdate the rise from 1st May; Adani wants it from 1st July. We are told the issue has now been placed before Pandian for an impartial decision.

Pandian has been accepted as referee in this matter, says a source. Anyway he is a sort of informal regulator as far as the state government is concerned.

If Pandian rules that the Hazira gas price should be raised from 1st May, Adani wants to raise CNG prices to Rs30 per kg. Adani recently raised CNG prices to Rs28 per kg from the previous price of slightly more than Rs26 per kg.

The issue of effective date is not so urgent, adds a source. Anyway Adani is now paying the new price ($4.05 per thousand cubic metres) and gas is flowing.

Some customers tell us the Hazira gas price rise comes amid sharply depleting gas supplies from the field. Some two years ago, say industry sources, Hazira was yielding about 4.4m cm/d gas but supplies are now down to just 3.2m cm/d.

For the next whole year it is likely to be just 2.2m cm/d, we hear. GSPC-Niko currently has nine contracts for Hazira gas.

It is most likely that six of these will not be renewed when they run out in 2007. Still, GSPC-Niko must continue servicing the contracts to Adani Energy, Gujarat Industrial Power Corporation and Gujarat Alkalies because these are valid for 10 years.

In one way it is good that the other contracts are expiring in 2007, adds a source. Because GSPC and Niko would have had very little gas to service them and would have ended up paying performance penalties.

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