Reliance, BG refuse to sign Panna/Mukta gas deal

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Thursday , March 27, 2008 at 1602 hrs Reliance Industries and BG Group of the UK have refused to sign contracts for allocating natural gas produced from Panna/Mukta and Tapti fields to GAIL unless the state run marketing agency signs back-to-back agreements to allot a part of it to them.

On instructions from the Prime Minister's Office for a more uniform distribution of the natural resource, the Petroleum Ministry had in December 2007 scrapped all contracts for sale of gas produced from PMT fields and nominated GAIL for selling it to 'fuel-starved' fertiliser plants outside Gujarat.

But after protests, the ministry agreed to partly restore 3.6 million standard cubic meters per day of gas out of 5.1 mmscmd consumed by RIL's petrochemical plants and 2.13 mmscmd from BG's share of 3.05 mmmscmd, sources said.

The part restoration has, however, been pending with Petroleum Minister Murli Deora for more than a month now and the two companies say they cannot sign contracts giving the 17 mmscmd gas produced from PMT fields to GAIL from April 1 unless back-to-back deals for their share of supplies are signed.

Sources said the ministry may, after getting the PMT operators - RIL, BG and ONGC - to commit gas to GAIL, deny gas to RIL's plants and BG's city gas projects in absence of a firm supply-or-pay agreement with the state-run firm.

The PMO had wanted to distribute the scarce resource evenly and not restrict it to just one state (Gujarat consumes 42 per cent of the current natural gas supplies). It felt that when scarcity of the fuel was forcing plants elsewhere to run below capacity, Gujarat too was supposed to share the pinch.

Besides restoring part supplies to RIL and BG, the ministry was also inclined to give Torrent Power and Rajasthan Rajya Vidyut Nigam Ltd (RRVUNL) their quota of 0.9 and 1.5 mmscmd gas.

GAIL, besides getting the marketing margin on sale of PMT gas, would also get 3 mmscmd for its LPG fractionators, sources said, adding that over 8 mmscmd gas would be available for sale to fertiliser plants on the Hazira-Vijaipur-Jagdishpur gas pipeline.

The Petroleum Ministry had in 2005 given the PMT joint venture freedom to market gas. It, however, in a surprise move in December 2007 decided to divert all the PMT gas to GAIL, barring quantities committed to RRVUNL, for sale at higher price of 5.7 dollars per million British thermal unit.