GAIL India wins rights to market gas from PMT fields

GAIL India wins rights to market gas from PMT fields

New Delhi: GAIL India has won the rights to market the gas jointly produced by Reliance Industries, British Gas and ONGC from the Panna-Mukta-Tapti fields, a move that will boost revenues of the company by over Rs5,000 crore.

The Oil Ministry, after three meetings with GAIL and the PMT consortium, decided to nominate for life the state-run firm to market the gas, sources said.

GAIL currently delivers about five million standard cubic meters per day of gas from the fields lying in western offshore and is not entitled to marketing margin. The government has now allowed the company to charge a marketing margin of $0.12 per million British thermal unit on the entire output of about 17 mmscmd from April 2008.

Since 2006-07, GAIL gets about 5 mmscmd of PMT gas at $4.75 per mBtu. Reliance-BG-ONGC sell 4.8 mmscmd at $3.96 per mBtu (some of it to themselves) and another 6.5 mmscmd at rates ranging from $4.6 to $5.7 per mBtu.

The sources said GAIL will get the entire PMT output at $5.7 per mBtu, a move that will also boost revenues of BG Group of UK, Reliance and Oil and Natural Gas Corp (ONGC).

For GAIL, the market margin would fetch a net income of about Rs112 crore and transportation tariff would add another Rs450 crore annually.

When contacted, GAIL chairman and managing director U.D. Choubey declined to comment.

In 2005-06, GAIL under P. Banerjee had lost out of marketing rights of PMT gas when the government allowed Reliance, BG (who own 30% stake each in the fields) and ONGC (which has the remaining 40%) to market the gas.

The sources said that as per the government decision of March 2006, the quantity in excess of 4.8 mmscmd -- for which Reliance-BG-ONGC had entered into sale contracts with customers directly -- was to be given to GAIL till March 2008. But the consortium made available only five mmscmd to GAIL and marketed 11.3 mmscmd on its own.

The direct sales of about 8 mmscmd by the joint venture -- except to Rajasthan Vidyut Nigam Ltd (1.5 mmscmd), Torrent (0.9 mmscmd) and GSPCL (1.3 mmscmd) -- was being made to related companies of the consortium members at 3.96 dollars per mBtu. These firms were RIL (1.74 mmscmd), RIL subsidiary IPCL (2.9 mmscmd) and BG’s Gujarat Gas (3.05 mmscmd).

The sources said the Oil Ministry has now decided that direct marketing of quantities beyond 4.8 mmscmd by the joint venture are not binding and GAIL would be government’s nominee for receiving and marketing of this gas.

The JV would commence supplies of all uncontracted or surplus quantities to GAIL immediately and there will be no extension of the contracts entered by the joint venture for 4.5-mmscmd PMT gas after they expire in March 2008. These quantities would be received and marketed by GAIL April 2008 onwards.

None of the contracts entered into by GAIL shall have the provision of gas trading by the consumer, unless specifically permitted by the Oil Ministry, the sources said.