ONGC, GAIL lock horns over marketing C-Series gas

ONGC, GAIL lock horns over marketing C-Series gas

New Delhi: State-owned Oil and Natural Gas Corp (ONGC) and GAIL India have locked horns over marketing rights of natural gas produced from the former’s C-Series field -- the latest one to go on production in the country.

Both ONGC and GAIL have sought rights to market the 3 million cubic meters a day of gas to be produced from western offshore C-Series fields to customers, industry sources said.

ONGC says it had been promised marketing rights of gas that is produced from any new field, while GAIL says it is the sole marketer of fuel produced from fields given prior to the advent of New Exploration Licensing Policy (NELP) in 1999.

The government is likely to allocate the C-Series gas to users in Uran region of Maharashtra, the point where the fuel makes landfall.

ONGC says it will hire GAIL’s pipeline network to ship the gas to consumers identified by the government. While GAIL will earn transportation tariff, ONGC says it can benefit from marketing margin on the fuel, sources said.

The marketing margin for C-Series can be anywhere between $0.12 to $0.18 per million British thermal unit.

At present GAIL charges $0.18 per mmBtu as marketing margin on sale of re-gasified-LNG and $0.12 per mmBtu on gas produced from BG-operated Panna/Mukta and Tapti fields in western offshore.

It charges $0.11 per mmBtu for selling gas from Ravva field operated by Cairn India and was recently allowed to charge an equivalent amount on the gas produced from fields given to ONGC on nomination basis.

Reliance Industries charges a marketing margin of $0.135 per mmBtu for gas produced from eastern offshore KG-D6, the nation’s largest gas field.

Sources said ONGC has started producing gas from C-Series fields but is selling it as APM or administered priced gas because of ambiguity over marketing rights and customers.

The APM gas is priced at $4.2 per mmBtu while the government has approved a price of $5.25 per mmBtu for ONGC’s C-Series gas.

ONGC, which had initially sought $5.5 per mmBtu as the price of C-Series gas, is currently mixing the fuel from its new field with APM gas produced from Mumbai High and neighbouring Bassein fields.

Sources said C-Series field is currently producing between 0.8 to 1.2 mmcmd from 6-7 wells drilled to date. Peak output of 2.8 mmscmd will be reached once all the 15 wells are drilled, which may happen post monsoon.

Peak output of 2.8 mmscmd will last 5-6 years.

Sources said the price approved for C-Series field is about a dollar more than the price at which Reliance sells gas from the nation’s biggest gas field in Krishna Godavari basin off the east coast.

Reliance gets $4.205 per mmBtu for the gas it produces from KG-D6 fields off the Andhra coast. The price is fixed for the first five years of production -- till March 2014.

The price for C-series field is lower than what GAIL pays for gas from the western offshore Panna/Mukta and Tapti or PMT, fields that are jointly owned by British Gas, Reliance and ONGC.

GAIL pays $5.7 per mmBtu for PMT gas, compared to $4.3 per mmBtu for Cairn India-operated Ravva field off the east coast.

None of the prices include transmission charges, marketing margins or local levies on gas sales.

ONGC has invested Rs3,195 crore to develop the C-Series marginal field that is estimated to hold in-place reserves of 15.54 billion cubic metres of gas and 4.46 million cubic metres of condensate.

The C-Series field was discovered in 1990s and is about 60 km west of Daman in the Tapti-Daman block offshore Mumbai at water depths ranging from 19 meters to 35 meters. However, it was considered marginal at the pre-revised price of $1.79 per mmBtu that ONGC got for most of its gas.