Govt to hike Ravva gas price by over 35 pc to USD 4.75/mmBtu

The government is likely to hike the price of natural gas produced from Cairn India-operated Ravva fields by 35 per cent to USD 4.75 in line with the rates it has approved for gas produced by ONGC from the same area.

About 0.9 million standard cubic meters per day of gas produced from the fields lying in Bay of Bengal, off the Andhra Pradesh coast, is currently sold at USD 3.5 per million British thermal unit.

"According to the Production Sharing Contract (PSC) for the Ravva fields, gas prices were to be revised from December 1, 2008," an oil ministry official said. "Somehow, we have not been able to act on Cairn's request for price revision since 2008 but now things are moving."

Cairn had sought USD 6.75 per mmBtu, a price it had discovered from by inviting bids from consumers in the region.

But the ministry is inclined to fix the rates at USD 4.75 per mmBtu, the price it recently approved for all new gas to be produced by state-run Oil and Natural Gas Corp (ONGC) from Krishna Godavari basin, the same area were Ravva is situated.

This price will be before addition of transportation charges, marketing margin and local taxes.

Industry sources said Cairn is entitled to a higher price of gas from December 1, 2008, till when the USD 3.5 per mmBtu rate was valid.

The company, they said, has a legitimate right to claim at least USD 4.205 per mmBtu - the price that the government had approved for Reliance Industries' KG basin gas fields, from December 2008 till June 30, 2010, the date on which the USD 4.75 per mmBtu price was approved the gas from the region.

State-owned gas utility GAIL India, which buys all of the gas produced from Ravva and the adjoining Ravva Satelite fields, is opposed to paying higher price. It was on GAIL's opposition last year that the price of gas from Ravva fields could not be revised, they said.

The oil ministry on June 28 issued guidelines for the price national oil companies like ONGC can charge for natural gas they produce from new fields in the blocks given to them on nomination basis.

ONGC will get USD 5.25 per mmBtu for the gas it produces for new fields in nominated blocks in the western offshore and USD 5 per mmBtu for fields in Kavery basin. It will get USD 4.75 per mmBtu for fields in KG basin off the Andhra coast.

The price approved is more than USD 3.818 per mmBtu that the government had set for the gas ONGC produces from its currently producing fields in the blocks given to it on nomination basis.

The price for consumers of this gas, known as APM or government administered gas, after including royalty is USD 4.2 per mmBtu, sources said.

Source: Financial Chronicle, Delhi, Thursday, 12th August 2010
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