GAIL gets nod to carry 'profit gas' upstream

GAIL (India) Ltd has been nominated by the government to carry 'profit gas', the government's share of gas produced from NELP blocks given to private upstream players.

The government has asked the PSU major to work on its pipeline transmission grid based on its share of profit gas. The company is now busy working with the directorate general of hydrocarbon (DGH) to work out likely volume of gas and a time chart schedule to carry it.

"It will take about three months to make the estimate. Based on this, we will make a proposal to the government to carry gas from sources to the potential markets," Proshanto Banerjee, chairman and managing director of GAIL, said.

The development gains in significance since the volume of profit gas is likely to be sizable and this will be additional business for the company.

GAIL is the nominated carrier for transportation of gas where the source of supply is ONGC or any other PSU. Now that E&P sector has been opened to private participation, the source of supply of gas is gradually shifting to private and joint venture players.

As per the production sharing contract (PSC) between the Centre and the operator, the government share comprises of profit gas, royalty and corporate tax.

Generally, the government's share in the profit gas increases progressively and typically, after the cost recoveries and cumulative earnings of the producers are discounted, its share could get as high as 50-70 per cent of the total profit gas produced from the block.

"We have also requested the ministry to take royalty from offshore gas producer in natural gas instead of money and allocate it to GAIL so that we can expand our pipeline infrastructure," Banerjee added. The company plans to spend Rs 20,000 crore to develop the national gas grid (NGG).

So far, the government has awarded 90 blocks throughout India under four rounds of New Exploration and Licensing Policy (NELP). As of today, gas has been discovered in 11 blocks, including a giant gas discovery in the D6 block in deep shore Bay of Bengal off the Andhra Pradesh coast.

With the recent new gas finds in the block NEC - 25 off the Orissa coast, the east coast of India is emerging as a major gas prone hydrocarbon province.

Along the west coast, five gas discoveries have been reported so far in onland Rajasthan, Mumbai offshore, Cambay onland and Saurashtra offshore.