Supply of Gas by GAIL to NTPC from the Panna-Mukta and Tapti fields

May 3, 2005, New Delhi 1. In September 1997, the Government of India issued a Gas Pricing Order, which stipulated an administered consumer price of Rs. 2,850 per thousand SCM for sale of natural gas, which included the gas from the Panna Mukta fields and the Tapti fields (PMT gas).

2. Accordingly, GAIL had been selling the PMT gas at the administered consumer price of Rs 2,850 per thousand SCM to all its customers.

3. On the 30th of November 2004, MoP&NG decided that with effect from the 1st of April 2005, the JV Operators of the PMT fields will directly sell the entire PMT gas.

4. However, it was decided subsequently by the Ministry of Petroleum and Natural Gas (MoP&NG) on the 4th of February, 2005 that, keeping in view the need to meet the requirements of the existing Power and Fertiliser sector consumers, with effect from the 1st of April, 2005, about 6 MMSCMD of the PMT gas will be offered to the existing Power and Fertiliser sector consumers at a price, which would be around the prevailing RLNG price by GAIL and the balance 5 MMSCMD gas would be sold directly by the JV.

5. On the 29th of March, 2005, MoP&NG decided that JV will sell 6 MMSCMD of gas to GAIL at US$ 3.86 per MMBTU and will sell the balance volume, which is about 5 MMSCMD, at a price not lower than US$ 3.86 per MMBTU.

6. On the 20th of April, 2005, MoP&NG further clarified that for the 6 MMSCMD of gas to be supplied to the Power and Fertilizer sector consumers by GAIL from the 1st of April 2005, the selling price to consumers shall be about Rs. 4,160 per 1000 SCM (i.e. US$ 2.35 per MMBTU).

7. As regards the balance volume of about 5 MMSCMD, JV offered the same to its customers in Gujarat at a price of US$ 4.08 per MMBTU.

8. As can be seen, the entire volume of gas from the PMT fields, w.e.f. the 1st of April, 2005, is being offered by two different marketers, i.e by GAIL and the JV, at two different prices. The high price offered by JV for the PMT gas in Gujarat has led to complaints from Gujarat-based customers and the Government of Gujarat.

9. The price of Rs. 4,160 per thousand cubic meter has been accepted by a large number of customers, namely NFL, Chambal Fertilizers, Tata Fertilizers, Indo Gulf, IFFCO, Oswal Fertilizers, Pragati Power, Delhi Vidyut Board who have started drawing their requirement of about 4 MMSCMD from last week. The only exception is NTPC.

10. NTPC have been insisting that they should be charged the APM price of 2,850 per thousand cubic meter under the Gas Pricing Order of 1997.

11. On the supply side, the problem is compounded by the fact that the availability at Hazira from the ONGC South Basein fields has declined by 12% from 31.4 MMSCMD in 2001-02 to 27.7 MMSCMD in 2004-05.

12. Keeping in view the onset of summer, GAIL has reserved 2.1 MMSCMD of PMT gas for NTPC and is continuously persuading them to pay the price accepted by others. It is expected that there will be a resolution shortly.