Oilmin, GSPC at odds over sales from Deen Dayal field

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New Delhi | Published: November 14, 2014 1:19:16 AM

Explorer wants a gas price of $8.5/mBtu against revised price of $5.61 from Nov

The petroleum ministry has pulled up Gujarat State Petroleum Corporation (GSPC) for not commencing gas supplies to Nagarjuna Fertilizers from its Deen Dayal West (DDW) gas field in the Krishna-Godavari basin.

“Last week, the petroleum ministry wrote to GSPC asking the reasons for not starting gas supplies. They (GSPC) had intimated the government that they are ready to start gas supply. So, the government allocated 0.8 mmscmd to Nagarjuna Fertilizers. Now, the fertiliser production is being hampered,” a top government official told FE.

He added that the ministry is yet to get a response from GSPC.

The bone of contention is on the pricing of the gas. The explorer wants a gas price of about $8.5/mBtu while the price as per the latest revised policy is $5.61/mBtu from November 1.

The presence of recoverable gas at the Deen Dayal fields was announced in 2005. GSPC has reportedly spend more than $2-3 billion to develop the acreage and also came across several hurdles to drill the area in the Bay of Bengal. Intitial estimated of production were pegged at 5-6 mmscmd, which could go upto 15 mmscmd upon development of additional wells.

The prolific find — KG-8 — later renamed as Deen Dayal is pegged to hold 1.8 trillion cubic feet (tcf) of reserves, which was also certified by upstream regulator Directorate General of Hydrocarbons (DGH). The block was bagged in 2003. GSPC is the operator with 80% stake while UK’s Jubilant and Canada’s GeoGlobal Resources each have 10% share.

From November 1, the price of domestically-produced natural gas has been be revised to $5.61/mmBtu from the current $4.2/mmBtu. The government decided to drop the Rangarajan panel-recommended gas pricing formula approved by the previous UPA government and put in place a new regime based on weighted average of global prices of the US, Mexico, Canada, EU, Russia and deducting the transportation and treatment charges at Henry Hub Alberta and National Balancing Point.

The government had said that discoveries in tough areas (high-pressure and high-temperature) would be given a ‘premium’ over the prevailing gas price. However, the caveat is that this would be applicable for hydrocarbon discoveries made post November 1.

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