Deora seeks global margins for LNG sellers

Marketing LNG may turn out to be a moolah maker in the gas sector. Petroleum minister Murli Deora has written to finance minister P Chidambaram to allow oil companies charge marketing margins in line with global practices. LNG marketing companies ?IOC, BPC and GAIL?who were fearing a cut in their marketing margins following the Tariff Commission order can now continue making a neat return by selling gas.

However, this may come as a major setback to the fertiliser and power companies who were hoping to see a price cut following the lowering of margins. The Tariff Commission had recommended that marketing margins on LNG should be reduced to around 1% of the delivered price. However, the petroleum minister has now made a case for the oilcos to charge marketing margins in line with global practices. This would translate to a charge of about 2.5% of the delivered price.

The petroleum ministry has instead made a case for a free market scenario in line with the principles of the gas market. Under NELP, all new gas finds would be sold at market rates. The case is particularly different in India as the LNG marketing companies have entered into takeor-pay contracts as intermediate offtakers for 5 years. The companies have obligations to either lift the committed quantities from Qatar or pay up.

Source: The Economic Times, New Delhi, September 6, 2006
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