Gas flares as Enron, GAIL impasse continues

DELHI, May 18: The stand-off between Enron Oil & Gas Company and Gas Authority of India (GAIL) over gas offtake from Tapti contract are...

DELHI, May 18: The stand-off between Enron Oil & Gas Company and Gas Authority of India (GAIL) over gas offtake from Tapti contract area continues with Enron threatening to announce its “inability to flow the natural gas” from the field.

After the Enron-Reliance combine had successfully bid for Tapti offshore field, a production sharing contract was entered into by the government and the consortium in 1994. However, the PSC has become a bone of contention with both sides yet to reach an agreement on the price at which the gas is to be bought as well as the quantity which is to be lifted. The result of the impasse is that the gas sales agreement is yet to be finalised and gas from the field is being flared.

While Enron insists that the contract stipulates the government or its nominee “take and purchase” the entire quantity of gas produced, GAIL has reiterated that the provisions in the PSC are “amply clear for gas sales/purchase contract to be on a best endeavour basis’.

Also in contention is the price of gas, penalties for non-performance, deliverability and allocation method which have limited the progress on finalisation of the agreement despite two years of continued negotiation.

A letter from the chairman & CEO of Enron Oil & Gas, Forrest E Hoglund, claims that the price at which gas is to be purchased is set forth in the PSC and was the principal tenet of its investment. The price of gas, which is linked to low sulphur fuel oil, is estimated to be around $3.1 per BTU.

GAIL, however, has called for gas sale at a mutually agreed upon price’ on an interim basis.

The mutually agreed price, claims the Enron chief, “is obviously contemplated to be lower than that provided for it in the PSC in order to put us (Enron) under pressure.”

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Additionally, GAIL’s effort to seek a “best endeavours” obligation for gas offtake is against the PSC, he says. The opinion of lawyers in India, the US and the UK, he adds, indicate that the government or its nominee is under obligation to take or pay for 100 % of the gas produced.