Government reopens ONGC sale deals

The Supreme Court decision upholding the government right to decide on sale of natural gas has prompted the latter to exercise control over gas sales from Oil and Natural Gas Corporation's C-series field, off the Daman coast.

The government-controlled company is unable to start production from the field, since the ministry of petroleum and natural gas wants to have a re-look at their pricing and marketing.
 
A senior ONGC executive had earlier told Business Standard that production from the field would start in April. The company wanted sell gas at $5.5 per million British thermal unit, a 30 per cent premium over the rate at which, Reliance Industries Ltd sells gas produced from its KG-D6 gas block.

RIL sells at $4.2 per mBtu and the price has been fixed for the first five years of production starting April 2009.

Gas produced from nominated fields operated by ONGC and Oil India is also now being sold at $4.2.

"We would have begun supply to GAIL India from the field two months ago. GAIL will be marketing the gas for ONGC. But the ministry wants to re-look into the pricing and marketing issue," said an ONGC executive.
 
The C-Series field would begin with 0.8 million standard cubic metres per day of output that would rise to around 3 mscmd in a year. C-series (eight wells) is a marginal field located 60 km west of Daman in the Tapti Daman block of Mumbai offshore. It was developed by ONGC at an investment of  Rs 3,195 crore (Rs 31.95 billion).

"Post the Supreme Court verdict in the Ambani gas dispute, the ministry is of the view that it needs to re-look into the issue of pricing and marketing of natural gas in our case, too," said a GAIL executive on condition of anonymity. GAIL had already finalised customers for the gas. These customers are now buying from the spot market.
 
According to a ministry official, "The ministry has the right and authority to approve both, the pricing and distribution issues. We are just exercising our rights."
 
While ruling in favour of Mukesh Ambani's RIL in a gas pricing dispute with Reliance Natural Resources Ltd, controlled by his estranged younger brother, Anil Ambani, the Supreme Court had said, "Though the contractor has the marketing freedom to sell the product from the contract area to other consumers, this freedom is not absolute. The price at which the produce will be sold to the consumer would be subject to government approval."
 
ONGC has been maintaining that the C-series field in Mumbai offshore is viable only at a market-related price.