Gail In Gas Supply Pact With Merubeni

Gas Authority of India Ltd (GAIL) has entered into a 20-year agreement with the Command-Merubeni-Videocon combine for purchase of gas from the Ravva offshore oil and gas field.

The agreement is for purchase of 1 million cubic metres of gas per day.

The price of the gas is linked to the basket of high sulphur fuel oil.

The current price of Ravva gas works out to $2 per million British thermal unit (BTU). At this price, the daily bill for Ravva gas works out to $60,000.

As per the terms of the agreement, GAIL is committed to purchase 1 million cubic metres of gas per day.

 

In case it fails to lift this quantity, it would have to pay for at least 75 per cent of the committed quantity.

Correspondingly, there is a penalty clause for the gas producers in case they fail to deliver the committed quantity of specification gas to GAIL.

There is a 15 per cent discount in case it is off-specification gas.

In case the gas does not meet the specifications of the off-specification gas as well, no charges will be paid by the public sector company to the producers for this gas.

If the free gas causes any damage to the equipment or plant of the user, this damage will be charged to the producers.

Although Command Petroleum has been taken over by Cairn Energy, the agreement has been initialed, along with Merubeni and Videocon, by Command Petroleum. The agreement is expected to be formally signed shortly.

The Command-Merubeni-Videocon consortium has laid the gas pipeline from the offshore field up to the shore. After that, GAIL has laid down its own pipeline up to the user-end. The entire gas will be supplied to user industries in Andhra Pradesh.

The trial run of gas supplies had started in January this year. However, it is being supplied on a commercial basis from April 11.