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BP Wants KG Gas Price to Rise 3 Times

  • BP Plc, formerly British Petroleum, said that gas it produces jointly with Reliance Industries from the Andhra offshore field be priced three times its present rate that was set by the government in 2007 for five years."We need to make sure predictable market pricing regime as envisaged in production sharing contract. Crude oil (produced in India) is sold at import parity, refinery products are sold at import parity (and) we hope that we get similar kind of pricing regime for gas as well," BP India head Sashi Mukundan told reporters here.
  • BP, which last year bought 30% stake in Reliance's 23 oil and gas blocks, including showpiece KG-D6, said import parity would be a rate equivalent to price at which gas in its liquid form (LNG ) is imported in ships from Qatar on long-term contract. At that level of parity, Reliance's gas would cost $12-13 per unit against $4.2. Reliance had written to government seeking upward revision in price ahead of the schedule on the lines of LNG pricing. tnn
  • Like RIL, BP too appeared to be fixated that only Qatar LNG price, which is indexed to crude oil, was the right import parity price and chose to ignore the recent long-term deal that state-owned GAIL signed to import LNG from the US at American gas index Henry Hub-linked rates.At $100 per barrel oil price, Qatar LNG would cost $12.67 per unit, while GAIL's US contract would be priced at less than $9 per unit.If approved, India will be the first country in the world to have domestically produced gas priced equivalent to LNG rates. LNG is always priced higher than domestic gas because of the cost involved in converting gas into its liquid form at sub-zero temperature, then shipping it in cryogenic vessels and again regassifying.
  • Mukundan refused to hazard a guess on the likely output from KG-D6 where production has fallen from 61.5 mcmd (million cubic metres per day) in March 2010 to about 35 mcmd currently, saying the RIL-BP combine was working on an integrated development plan for all of the 18 discoveries made in the block and would come out with "sustainable production" numbers soon.

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