ONGC says â€کno' to 400,000 cm/d of D6 gas

Vol 13, PW 18 (25 Feb 10) Exploration & Production

Not often do you hear of a company turning down an offer of D6 gas but that’s exactly what ONGC is doing in a three-way dispute with Reliance and GAIL! Oil ministry joint secretary marketing Apurva Chandra has been called in to find a solution which, if it works out, could set a precedent for onward sales of D6 gas from customers who no longer want it, for whatever reason.

PETROWATCH learns Chandra has been chairing regular meetings about the future of 400,000 cm/d D6 gas originally allocated to ONGC in October for its LPG extraction unit at Usar outside Mumbai. These D6 gas supplies were meant to compensate ONGC for the LPG it was extracting from its Mumbai High offshore production.

But Mumbai High supplies are rising, so ONGC says it no longer needs the D6 gas supplies, at least for now! This is bad news for Reliance, which is not allowed to sell the gas to anyone else and stands to lose its 13.5 cents/mmbtu marketing margin on D6 supplies to ONGC. For its part, ONGC wants to take the D6 gas supplies and sell them on to GAIL after adding its owns 10 cents/mmbtu marketing margin on top of Reliance’s 13.5 cents/mmbtu margin.

Sounds good to everyone - except to GAIL! Unsurprisingly, GAIL does not want to pay extra for D6 gas supplies, when it could just as easily get it directly from Reliance without the added ONGC margin. Besides, it would be difficult for GAIL to find customers willing to take the gas and pay the accrued margins from Reliance and ONGC.

Reliance is now looking to joint secretary Chandra to sort out this tangled web of conflicting interests. “There will be a solution,â€‌ says an industry source confidently.

“It is just a matter of days; the ministry is determined to help Reliance.â€‌