Cairn seeks $ 8.5 selling price for Rajasthan gas

NEW DELHI: Cairn India has sought $ 8.5 selling price for the first natural gas production from its predominantly oil-rich Barmer block in Rajasthan.


The company has written to the Oil Ministry has it has negotiated a gas sale price of $ 8.5 per million British thermal unit with Gujarat Narmada Valley Fertiliser and Chemicals Ltd ( GNFC), sources privy to the development said.

Cairn had last month begun production from the Raageshwari gas field in the Barmer basin RJ-ON-90/1 block and the government had allocated initial volumes to GNFC, whose fertiliser plant is connected with the pipeline.

The price being sought by Cairn is higher than USD 4.20 per mmBtu price that state-owned Oil & Natural Gas Corp ( ONGC) and Reliance Industries Ltd (RIL) get for the gas they produce.

Sources said Cairn in the letter to the Ministry said the price negotiated was much above the floor price of USD 5 per mmBtu set in the tender soliciting buyers for the gas.

The gas price negotiated would result in incremental annual revenue of around USD 3.5 million to the Government of India and ONGC compared to the revenues obtained considering the floor price of USD 5 per mmBtu, it said.

ONGC holds 30 per cent interest in the Rajasthan block which is operated by Cairn. Cairn has 70 per cent stake.

Oil Minister M Veerappa Moily had on March 23 inaugurated production of test gas from Raageshwari field.

Cairn had entered into a Gas Sales Agreement with GNFC after the Ministry allocated gas from the field to the fertiliser company.

The price of USD 8.5 per mmBtu, Cairn said, was "arrived at on an arm's length basis, in line with the requirements of RJ-ON-90/1 Production Sharing Contract (PSC) and is also economically beneficial to all the stakeholders, including Government of India."

Cairn produces about 5 million standard cubic feet per day from Raageshwari field, the only gas find among 26 discoveries it has made in the Rajasthan block.

The company currently produces about 175,000 barrels per day of crude oil from Mangala, Bhagyam, Aishwariya and Saraswati oil fields.

Raageshwari deep gas field initially supplied gas to meet the entire requirement of the crude oil processing plant and a 670-km pipeline that runs from Barmer to Bhogat near Jamnagar in Gujarat carrying oil to refineries.

But with rise in production, Cairn is now selling the fuel to GNFC.