K-G gas output: GSPC awaits central nod on price

Approval of gas pricing formula is required to put through gas sales agreements with customers

Gujarat State Petroleum Corporation (GSPC) is ready to commence commercial production from the Deen Dayal West (DDW) gas field in the Krishna-Godavari basin from July but is awaiting approval of the pricing formula from the Union petroleum ministry.

The approval is required to put through gas sales agreements with customers, which in turn are required to finalise Gas Transportation Agreements with transmission companies.

GSPC had in January informed the ministry that the company had entered the commissioning stage and expected commercial production from DDW to begin from the first quarter of 2014-15. Approval was delayed due to the general elections. Now, with then Gujarat chief minister Narendra Modi having become the country’s Prime Minister, the company expects early approval.

Last year, GSPC had suggested a formula based on the price of Brent crude oil. It wanted a minimum sale price of $8.50 a mBtu, at a floor rate of $65 a barrel of crude oil. It also prescribed cap on the oil price at $110 per barrel, for which the gas price translates into $14.2 an mBtu. The price sought excludes taxes and other levies; GSPC also wants to charge an additional marketing margin of Rs 10.21 an mBtu. It said this price was arrived at through an exercise done in 2013 for over a month, supervised by a third-party auditor.

GSPC, Jubilant Offshore Drilling and Geo Global Resources (India) signed a production sharing contract in February 2003 with the Government of India for the block on the east coast.  of India; GSPC is designated as the operator.

The company says the DDW consortium has already spent around $2,800 million of risk capital in the gas field and another $1,200 mn of capital investment was required to be invested in the coming five years.