The joint operators of the Panna/Mukta and Tapti oil and gas fields, British energy firm BG Group, Reliance Industries Ltd and Oil and Natural Gas Corporation, have hiked the price of natural gas produced from the Tapti field.

"We have raised the ceiling/cap price of Tapti gas to $5.27 per million British thermal unit from $3.11 per mbtu," a source in the consortium said.

Currently, the 5.2 million standard cubic metres per day of gas produced from Tapti field is sold to state-run gas marketer GAIL India at a price between $2.11 per mbtu (floor/lower ceiling) and $3.11 per mbtu (cap/ceiling price).

The joint operators have informed GAIL that they will from June 26 bill it on the basis of average price of basket of fuel oil, which certainly is likely to be more than the current ceiling price of $3.11 per mbtu but would not touch the new cap price of $5.27 per mbtu immediately.

"We have a provision in the production sharing contract for the field that the operator can raise the base (floor) price of gas by 150 per cent after seven years of production," the source said, adding cap price of 3.5 mmscmd gas produced from Panna/Mukta field would also be raised next year when it completes seven years in production.

BG and RIL owns 30 per cent stake a piece in the Panna/Mukta and Tapti fields, which contributes 7 per cent of the country's total oil and gas production. ONGC has the remaining 40 per cent.

GAIL has opposed the move and has approached the petroleum ministry for a stay. "Nowhere in the world is domestic natural gas sold at $5 per mbtu). Such a price would certainly be not acceptable with major consumers in power and fertilizer who cannot pass through the fuel cost as their final product price is subsidised by government and capped," a senior GAIL official said.

The joint operators of the Panna/Mukta and Tapti producing oil and gas fields off the west coast have launched a $745 million output enhancement campaign with a multi-well drilling programme.

The partners plan to sink up to 18 wells in the Panna/Mukta oil and gas fields and a four-well re-completion programme is lined up for the Tapti gas field. Seven of the 18 wells, and the re-completion wells, are due to be drilled in the first stage.

The timing of the further 11 wells will be confirmed at a later date.

Tapti's gas output is expected to be lifted by between 350 million cubic feet per day and 423 mmcfd (12 mmscmd), while Panna will see incremental production of 18.5 million
barrels of crude and 76 billion cubic feet of gas, with first production expected in the third quarter of 2005.

Oil from the fields is sold to the government of India nominee Indian Oil Corporation and gas is sold to Gail.

The Panna field is 95-km north-west of Mumbai in water depths of 45 metres to 70 metres. It was estimated to have originally held 1 billion barrels of oil in place and 1.8 trillion cubic feet of gas in place.