ONGC wants to sell gas directly to customers

Oil and Natural Gas Corp on Tuesday disputed claims made by gas utility GAIL (India) Ltd of an agreement with the operators of Panna/Mukta and Tapti fields to continue selling gas beyond March 31 and said it, along with British Gas and Reliance Industries, wants to sell gas directly to customers.

"GAIL collects $0.10-0.20 per million British thermal unit (mBtu) marketing margin for selling gas from the PMT fields to consumers. We don't see why customers should pay extra when they can get the supplies directly from us," ONGC chairman and managing director Subir Raha said.

Raha said ONGC-BG Group-Reliance Industries had asked Petroleum Ministry for permission to sell 6 million standard cubic meters per day of gas from Tapti and Panna-Mukta fields, currently being supplied to GAIL, directly to customers at market price from April 2006.

Currently, the joint operators sell 6 mmscmd of gas to GAIL at controlled price of $3.86 per mBtu or Rs 7,046 per thousand cubic meters (exclusive of sales tax). They market the remaining 4.8 mmscmd of gas from the fields at $4.08 per mBtu (or Rs 7448 per thousand cubic meters).

Raha said the government had asked ONGC-BG-RIL to supply 6 mmscmd of gas from the fields to GAIL for one year from April 1, 2005 so that power and fertiliser companies on HBJ pipeline do not get impacts. "Though there is a rethink on the decision, we haven't yet been instructed on the issue and so the PMT joint operators have not reached any agreement with GAIL to continue selling gas beyond March 31."

"We don't want middleman (to sell gas to consumers)," he said.

GAIL had last week posted notices to the stock exchanges saying "with the recent communication from the Government of India to the PMT consortium to continue supply of 6 mmscmd of natural gas beyond March 2006, broadly on same terms and conditions, GAIL does not anticipate any difficulty in meeting the demand during the ensuing summer and Rabi season, for want of PMT gas."

Asked what could be the market price, Raha said ONGC had struck a deal with Rajasthan electricity board to sell gas at $4.60 per mBtu and this could be a benchmark.

"If the Government wants to give priority to power and fertilizer sector, we will honour it (when we begin direct marketing of PMT gas)," he said.

GAIL in the notice had stated that "Tapti, Panna-Mukta are discovered fields handed over to consortium for development and as per production sharing contract between the consortium and the government of India, the gas will be received by Government of India or its nominee, which in this case is GAIL (India) Ltd."