GAIL opposes $6.75/mmBtu rate for Ravva Satellite field gas

GAIL opposes $6.75/mmBtu rate for Ravva Satellite field gas

New Delhi: State-run gas utility GAIL India has opposed the $6.75 per million British thermal unit price sought by the Cairn India-led joint venture for the gas produced from the Ravva Satellite fields in the KG basin.

“We have told them in no uncertain terms that $6.75 per mmBtu price is not acceptable to us," a GAIL official said.

The Cairn-ONGC-Videocon consortium had last month written to the petroleum ministry seeking a 57% hike in the Ravva Satellite field gas price citing provision in the production sharing contract (PSC) for the field.

GAIL, at present, buys 0.9 million standard cubic meters per day of gas produced from the Ravva Satellite fields at $4.3 per mmBtu and has a right to match the rate the Cairn-led consortium discovers from the market.

“We don’t agree with the price discovered by Cairn. We feel $4.3 per mmBtu is a just price," he said adding: “The government will now have to decide between continuing gas sales to GAIL or giving the consortium marketing freedom."

The new price sought by the Ravva consortium is 60% more than the maximum price of $4.2 per mmBtu approved for Reliance Industries’ KG-D6 fields till 2014.

Gas from Panna/Mukta and Tapti fields operated by a joint venture (JV) led by UK’s BG Group is sold at $5.51 per mmBtu and from the Lakshmi fields at USD 4.75 per mmBtu.

The official said the petroleum ministry has asked GAIL if it is willing to buy gas at the new price and in case the state-run firm refuses, the Ravva joint venture would have the freedom to market the gas produced from the satellite field to private parties at a price not less than $6.75 per mmBtu.

In case it is decided that the joint venture may market the gas produced from the field to private parties, they would not be allowed to charge any marketing margin.

The production sharing contract for Ravva stipulates that the price of natural gas produced from the gas field other than existing discoveries for use in India shall be priced at market determined rates. Price revision for the Ravva Satellite field is due since December 2008.

The Ravva JV in April this year invited offers from Vemagiri Power Generation Ltd of the GRM Group, GVK Power and Infrastructure Ltd and Silkroad Sugar Pvt Ltd for selling the 0.9 mmscmd of gas.

“Silkroad offered a price of $6.75 per mmBtu and accordingly the Ravva JV asked GAIL to match the price," he said.