The gas sales contracts signed by the joint venture partners of the Panna-Mukta and Tapti (PMT) fields, including Reliance Industries, British Gas and ONGC, have come under the scanner of the petroleum ministry for violation of the production sharing contract (PSC) norms.
As part of its discussions with the JV partners, the petroleum ministry had, in March 2006, allowed a direct sale of 5.6 mmscmd of PMT gas to consumers for a period of 2 years (up to March 2008). This was of the total gas availability of 10.6 mmscmd with the PMT JV partners in 2006. Another 4.8 mmscmd (of the 10.6 mmscmd) was given to the state-owned GAIL (India) Limited, with a direction that any further available gas will also be given to GAIL.
However, a recent review by the ministry has revealed that while supplies to GAIL remained constant, the supply of PMT JV to its direct customers have risen to about 11 mmscmd, of the present total supply of around 17 mmscmd. The review further revealed that against the contract period, specified by the petroleum ministry (March 2008), the PMT JV partners have actually committed gas supplies to consumers under direct sales till 2019. As under PSC, the offtake of gas has to be decided by the government, the act of the PMT JV partners to commit gas supplies to the consumers, beyond March 2008, has been seen as a violation of the PSC provisions. Accordingly, the PMT consortium has been asked to forward all the gas sale contracts for a scrutiny by the petroleum ministry.
Interestingly, of the total 13 gas sales contracts signed by the PMT JV partners for about 16.4 mmscmd, supplies to the tune of 8 mmscmd have been committed by Reliance and BG to their group companies.
While Reliance has committed gas supplies of 2.9 mmscmd to IPCL, 1.74 mmscmd to RIL and another 0.65 mmscmd to RIL Hazira, BG has also committed 3.05 mmscmd gas to its subsidiary Gujarat Gas Company (3.05 mmscmd), with validity till 2019.
The petroleum ministry has told the PMT consortium that the entire gas availability from April 2008 onwards shall be received by GAIL under the PSC terms. Also, there will no extension of the PMT JV direct contracts beyond March 2008 and the ONGC?s long term contract for 1.5 mmscmd with Rajasthan Vidyut Nigam, being a state PSU, be assigned to GAIL for the gas supply. Sources said that there were other issues related to PSC that have come to light in the review by the ministry.
While gas supplies from Tapti began in June, 1997 and from Panna-Mukta in Feb 1998, with price band of $2.11 (floor) and $3.11 (ceiling), the PSC stipulated revision of ceiling price to 150% of last preceding 18 months of basket of fuel oil. Accordingly the applicable ceiling price works is$5.7/mmbtu.
However, presently the PMT JV is supplying gas at three different rates of $ 4.08, $4.75 and $5.70 per mmbtu. The ministry has also objected to the fact that gas from two contract areas is being sold in commingled form. Further allocation of gas from two PSC to different rates impacts profit petroleum.