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Gas to cost more for Gujarat cos

Gas to cost more for Gujarat cos
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First Published: Wed, May 09 2007. 12 09 AM IST
Updated: Wed, May 09 2007. 12 09 AM IST
Ahmedabad: Power companies and fertilizer manufacturers may have to pay more liquefied natural gas with state-owned firms Gail (India) Ltd, Indian Oil Corp. Ltd (IOC) and Bharat Petroleum Corp. Ltd (BPCL) set to increase the price of liquefied natural gas (LNG) lifted from the Dahej terminal of Petronet LNG Ltd, following a directive from the government.
The Centre has asked them to average out the price of spot LNG and that of ‘long-term contracted’ LNG landing at the terminal in an effort to lower the price spot-buyers of LNG pay for the fuel.
The government has, however, kept the customers buying LNG from global hydrocarbon major Shell’s subsidiary Hazira LNG Ltd out of the purview of this directive. Almost all the customers of Hazira LNG buy their LNG on a spot basis.
LNG is normally available at about $3.45 (Rs141.45) per million British thermal equivalent unit (mBtu) on long-term contracts. The spot prices could be anywhere between $9 and $11 per mBtu. The averaging out will mean an increase in price for firms that were buying gas on long-term contracts, and a decrease for those that buy at spot rates.
Gujarat government officials, who did not wish to be identified, allege that this move is aimed at bringing down the power production cost at the 2,200MW Ratnagiri Gas and Power Private Ltd (RGPPL), the born-again Dabhol power project in Maharashtra; the plant would have had to buy gas at spot prices, but can now get it at a lower cost. Maharashtra is in the middle of a power crisis, and needs the plant to run at full capacity. Petronet LNG and the Indian government officials could not be contacted for their views.
The three public sector companies have the exclusive right to market regassified LNG in the Indian market while Petronet LNG sources, transports and regassifies the natural gas. Petronet LNG had entered into a long-term gas purchase agreement with Qatar’s RasGas for purchase of LNG.
The three state-run oil firms, on their part, have entered into a long-term agreements on volume and pricing of this LNG with various industrial and retail customers.
Petronet LNG sources additional LNG over and above the contracted one from global market at prevailing spot prices whenever there is a rise in demand for natural gas. A little more than 80% of the gas imported by Petronet is through long-term contracts.
In a letter to Petronet LNG managing director and CEO P. Dasgupta, the Centre has said that “uniform pooled prices should be charged from all the existing and new customers” for LNG.
Accordingly, Gail and IOC have issued notices to their customers, saying the gas price will be revised from time to time in accordance with the government directive. The oil firms will give their customers one-week’s notice before the revised price is made effective. The current long-term contracted price of Rs137 per mBtu is valid up to 31 December 2008. The price can rise by 52% to Rs209 per mBtu following the move.
As per an internal note prepared by Gujarat government, the rise in LNG prices will cost Gail customers Gujarat State Petroleum Corp. (GSPC), Gujarat Alkalies and Chemicals Ltd, Gujarat State Fertilizers Corp., Gujarat Narmada Valley Co. Ltd, Gujarat Industries Power Corporation Ltd and Uttran and Dhuvaran power plants about Rs382 crore.
IOC and BPCL customers GSPC and Essar Steel would be required to pay an additional Rs368 crore.
“Companies in Gujarat would stand to lose more than Rs750 crore directly due to rise in the prices of contracted LNG,” said Saurabh Patel, minister of state for energy, petrochemicals and finance, Gujarat.
Much of the gas landing in Dahej is used in Gujarat. And companies such as Tata Chemicals (in Uttar Pradesh), Maruti Udyog (in Gurgaon), and Indrapastha Power (in Delhi) may have to pay more too.
“There is no clause in the contract that allows marketing companies to raise prices, except in extreme circumstances,” said Patel. He also said that the Gujarat government could be forced to raise the price of power in the state because of this.
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First Published: Wed, May 09 2007. 12 09 AM IST
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