The Hindu Business Line : Ravva gas: GAIL told to use D6 price as reference

Anomaly
There is a little scope of revising gas price from Ravva Satellite.
But Ravva fields gas rates can be increased.
Still lower than that of Panna-Mukta-Tapti fields.

Richa Mishra

New Delhi, March 9

The Petroleum Ministry has asked GAIL (India) Ltd to keep Reliance Industries’ eastern offshore fields (D6 block) gas price, as one of the benchmarks, while negotiating the revised price for the Cairn India-operated Ravva/Ravva Satellite field.

Official sources told Business Line that “the negotiations are still going on with the Ravva joint venture. The Ministry has asked GAIL to keep D6 price of $ 4.2/million British thermal units (at the delivery point) decided by an Empowered Group of Ministers, as one of the reference prices.”

Price variations

However, according to industry sources, considering D6 price as a benchmark may not be a viable option either for the joint venture or the Government. While gas from Ravva field is sold at $3.5/mBtu, the price of gas from Ravva Satellite is $4.3/mBtu.

If the D6 price is taken as a reference point then there is a little scope of revising gas price from Ravva Satellite, but price from Ravva fields can be increased, official sources said.

Panna-Mukta-Tapti prices

“Though the price from Ravva Satellite field was already market determined, it was still lower than the price that the joint venture partners of Panna-Mukta-Tapti (PMT) fields sell their gas at. Gas price from PMT fields averages at $5.7/mBtu, a benchmark which any seller would look at,” sources added.

The Ravva joint venture is also looking at the PMT price, as anything lower would be lesser revenues and lower profit petroleum to the Government. Besides, the production sharing contract (PSC) as well as the gas sell contract provide that price formula be benchmarked with the imported price of fuel oil, for a period of 12 months average, which is equivalent to $12/mBtu gas price currently, sources said.

New rates

Current rates from Ravva/ Ravva Satellite fields expired on November 30, 2008, and new rates were applicable from December 1, according to the PSC.

The PSC provides for price revision after completion of five years of gas supply.

“Before taking a decision on the price, the interest of all beneficiaries (customers) is required to be kept in mind. Some customers were opposing any upward revision,” sources said.

Till a final decision on revised price is not taken, the current price will prevail, sources added. GAIL buys 1 mscmd of gas from Ravva field and 0.9 mscmd from Ravva Satellite.

Cairn’s partners in the fields that are off the Andhra Pradesh coast are ONGC, Videocon Industries, and Ravva Oil.

More Stories on : Petroleum | GAIL (India) Ltd

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page