India’s biggest gas marketer Gail India said the long-term gas import contract with Australia’s Gorgon project for about $15.67 per unit price is too high and does not reflect market reality, prompting the state firm to ask the importer, Petronet LNG (PLL), to renegotiate the contract. Gail’s statement follows demands from some energy firms for import-parity price for domestically produced natural gas. These firms criticised the recently approved pricing formula propounded by the the Rangarajan committee because it does not reflect true market value, government and industry officials said.
Gail has written to PLL to renegotiate the contract. This is a fit case to look at those contracts. It should reflect the current market price, Gail Chairman BC Tripathi said after announcing its quarterly financial results. Gail has reported 29 per cent fall in the first quarter of current financial year because of a decline in trading volume and lower margins. Oil Ministry says Gujarat-based GSPC had demanded more than $13 per unit price for gas it would produce from its KG basin block, which is located close to Reliance Industries-operated KG-D6 gas field.
Other private oil companies have also expressed unhappiness for government fixing domestic gas price, which is against the contract that provides them freedom to charge market rates for gas, a senior oil ministry official said. Gail officials said they are finding hard to sell Gorgon liquefied natural gas (LNG) in India because there are no buyers.
Gail was struggling to find buyers for imported LNG because of the uncertain investment climate, reluctance of customers to commit to long-term purchases and high price of imported gas. According to Gail officials, the landed price of Gorgon gas would be around $15.67 per unit.
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