 "Cairn India employees work at a storage facility for crude oil at Mangala oil field at Barmer in Rajasthan")
At a time when natural gas producers in the country are worried about the fall in prices, Cairn India, which enjoys a unique position in pricing under a production sharing contract (PSC), is facing problems in selling increased volumes.
The company already sells 0.42 million standard cubic metre gas a day from its Barmer block in Rajasthan to fertiliser unit in Gujarat. Cairn now wants to produce additional quantity, which its existing customers are willing to buy on a firm basis. However, there are transportation issues. Besides, the Union government is not willing to make additional allocations, said a person close to the development.
Altogether, Cairn is able to produce around 0.6 mmscmd gas at present. The company plans to increase the volume to 1 mmscmd by next year. Under the PSC signed for the block, the operator has freedom on pricing front. It is not restricted by the domestic gas pricing guidelines.
The Rajasthan block commenced gas sales in April 2013 to fertiliser unit in Gujarat through Gujarat State Petroleum Ltd’s (GSPL) gas pipeline network at Wankaner. The gas buyers have a transportation arrangement with Gujarat government-owned GSPL.
While buyers want more gas, transportation issues are blocking the offtake. Since commencement of gas production from Rageshwari, GSPL has been restricting sales at Wankaner, citing regulatory and technical issues and other problems at certain sections of its pipeline, said the person quoted above.
Officials said GSPL has cited revenue loss due to impact on network tariff as per Petroleum and Natural Gas Regulatory Board (PNGRB) rules. Besides, there are technical capacity constraints in certain sections of the GSPL grid.
Even when GOI increased allocation from 0.2 mmscmd to 0.42 mmscmd (firm) and 0.18 mmscmd (fallback), the transporter was not aligned to supply additional gas. Subsequently, after two months of gas supply was allowed for up to 0.42 mmscmd, citing technical constraints in the pipeline against a capability to sell 0.6 mmscmd on a consistent basis. Even this increase was on account of a commercial arrangement between Cairn and the transporter. Later, sales increased to 0.50 mmscmd but volume was again restricted to 0.42 mmscmd.
Industry players said such bottlenecks were restricting domestic gas supply even though GSPL continues to import liquefied natural gas to meet the industry requirement.
