Sale of â€کC-Series' gas held up by oil ministry directive

Vol 13, PW 5 (13 Aug 09) Midstream & Downstream

GAIL has put on hold the sale of C-Series gas from the Mumbai Offshore after an oil ministry attack against ONGC’s decision to begin supplies from August 10 without clearance.

This jeopardises several Gas Supply Agreements (GSAs) GAIL has already signed in Gujarat this month (August) and a planned GSA with Gujarat Gas for the supply of between 300,000 and 400,000 cm/d. “For the time being everything is on hold,â€‌ a GAIL official tells PETROWATCH.

Under scrutiny at the oil ministry is how ONGC could supply gas to GAIL from August 10 without clearance, and more importantly, how it worked out a market price of $5.5/mmbtu. In February this year, GAIL and ONGC agreed on the $5.5/mmbtu market price but the oil ministry has now directed ONGC to stop supplies until it grants formal permission.

GAIL was supposed to receive 1m cm/d of gas from ONGC’s marginal C-Series fields in the Tapti-Daman block in the Mumbai Offshore Basin starting August 10, with supplies ramping up to 3m cm/d. But the oil ministry, already in trouble over the ongoing Ambani feud and the price of KG Basin gas, doesn’t want any more messy gas pricing battles on its hands.

“After the Reliance fiasco,â€‌ we learn, “it seems the oil ministry is playing safe.â€‌ There are also fears that getting the go ahead from the ministry may be a time consuming affair as the much-awaited Supreme Court appeal by Mukesh Ambani-owned Reliance is scheduled for September 1.

“Thanks to the ministry’s intervention,â€‌ adds a source, “I cannot predict when this will be resolved.â€‌ Several factories in south Gujarat’s â€کchemical belt’ were to benefit from additional supplies of C-Series gas.

“Our priority was to sell to customers connected to our pipeline network,â€‌ adds GAIL. Production at these factories is now likely to be hit by the oil ministry decision to block supplies.