Using C-Series gas supplies to fill D6 gap

Vol 14, PW 5 (26 Aug 10) Midstream & Downstream

India’s oil ministry wants to resolve the disparity between actual D6 gas production and D6 gas allocations by substituting some D6 supplies from ONGC’s C-Series fields offshore Mumbai.

PETROWATCH learns 2.13m cm/d of D6 gas currently received by state-owned fertiliser manufacturer Rashtriya Chemicals & Fertilizers for its Thal factory on the outskirts of Mumbai could soon be replaced with C-Series gas. This was recommended and accepted at the July 28 gas allocation meeting of the Empowered Group of Ministers, we hear, but will be implemented only after the minutes are approved.

Reliance currently produces a total 60m cm/d from the D1 and D3 fields in the D6 block but the oil ministry has so far allocated nearly 63m cm/d. Despite ministry pressure, Reliance refuses to sign gas sales contracts for anything over its current production.

“Reliance worries it will be in breach of contract,” we hear, “if it signs agreements for quantities over current production.” Reliance, he adds, would also have to unfairly reduce supplies to existing customers if it signed these new agreements.

Faced with resistance from Reliance, the ministry had no option but to divert some C-Series gas to replace the excess D6 gas it had allocated. ONGC has yet to commence production from the C-Series fields, where all the wells are still capped.

When production begins, initial supplies should be 1.2m cm/d rising to around 2m cm/d within six months and then to a plateau rate of 3m cm/d to be maintained for seven years – exactly enough to cover the 3m cm/d D6 deficit. Most affected by the ministry move will be several south Gujarat factories who signed gas purchase agreements with GAIL nearly a year ago for C-Series supplies.

After the ministry substitution, just 870,000 cm/d of C-Series gas at plateau production will be left for these industrial customers.