14 March 2012
Muscat: A move by Oman government to substantially increase the natural gas price supplied to Oman-India Fertiliser Company (Omifco) in Sur may jeopardise the very viability of the joint venture firm, if Indian government does not agree for revising the price of fertiliser it imports from Oman.
According to sources, Oman's Ministry of Oil and Gas has asked Omifco to pay $3 per million British Thermal Unit (mBtu) of natural gas, which is against the existing rate of 77 cents. Sources said the cost of producing every tonne of urea will go up by $60 at the Omifco plant, once the government increases its natural gas feedstock price. Since the company produces almost two million tonnes of urea a year, the annual cost escalation is estimated at $120 million.
Sources said that the talks between Oman and India at various levels are still going on and the Indian government is yet to reach an amicable settlement with its Omani counterparts on natural gas price revision. "Top-level officials at India's Ministry of Fertiliser and Oman's Ministry of Oil and Gas are discussing at various levels," said a source, adding; "We haven't received any reply from the Indian side so far. Omifco CEO is visiting India soon to explain the whole situation."
A source at the Ministry of Oil and Gas earlier said that the natural gas price was extremely low when the government fixed it few years ago, when these industries were conceived and started operation. Oman government's request comes at a time when most of the gas-based industries, including Sohar Aluminium, Vale and Jindal Shadeed, are seriously looking for additional gas allocation for expanding capacities.
An Indian newspaper reported that the revised gas rate sought by Oman will be effective from January 1, though Omifco has been allowed to make provisional payments at old rates till March 31.
The $960 million-Omifco ships around two million tonnes of urea, which is the entire production, to India under a buy-back agreement the country has with the Oman government. Under the contract, the rates were fixed for 15 years.
Indian Farmers Fertilizer Cooperative Ltd (Iffco) and Krishak Bharati Cooperative Ltd own 25 per cent each in Omifco. Oman government's investment arm, Oman Oil Company, owns the remaining 50 per cent. The company has started operation in 2005 with an annual capacity to produce nearly 1.65 million tonnes of urea.
Sources said Omifco exports urea to India at a pre-determined price under a long-term contract, which undergoes minor revision every year. "However, a substantial increase in one go is a big issue. This has to get approval from the fertilizer ministry, Prime Minister's office and probably the cabinet committee," noted a source, on condition of anonymity.
Muscat: A move by Oman government to substantially increase the natural gas price supplied to Oman-India Fertiliser Company (Omifco) in Sur may jeopardise the very viability of the joint venture firm, if Indian government does not agree for revising the price of fertiliser it imports from Oman.
According to sources, Oman's Ministry of Oil and Gas has asked Omifco to pay $3 per million British Thermal Unit (mBtu) of natural gas, which is against the existing rate of 77 cents. Sources said the cost of producing every tonne of urea will go up by $60 at the Omifco plant, once the government increases its natural gas feedstock price. Since the company produces almost two million tonnes of urea a year, the annual cost escalation is estimated at $120 million.
Sources said that the talks between Oman and India at various levels are still going on and the Indian government is yet to reach an amicable settlement with its Omani counterparts on natural gas price revision. "Top-level officials at India's Ministry of Fertiliser and Oman's Ministry of Oil and Gas are discussing at various levels," said a source, adding; "We haven't received any reply from the Indian side so far. Omifco CEO is visiting India soon to explain the whole situation."
A source at the Ministry of Oil and Gas earlier said that the natural gas price was extremely low when the government fixed it few years ago, when these industries were conceived and started operation. Oman government's request comes at a time when most of the gas-based industries, including Sohar Aluminium, Vale and Jindal Shadeed, are seriously looking for additional gas allocation for expanding capacities.
An Indian newspaper reported that the revised gas rate sought by Oman will be effective from January 1, though Omifco has been allowed to make provisional payments at old rates till March 31.
The $960 million-Omifco ships around two million tonnes of urea, which is the entire production, to India under a buy-back agreement the country has with the Oman government. Under the contract, the rates were fixed for 15 years.
Indian Farmers Fertilizer Cooperative Ltd (Iffco) and Krishak Bharati Cooperative Ltd own 25 per cent each in Omifco. Oman government's investment arm, Oman Oil Company, owns the remaining 50 per cent. The company has started operation in 2005 with an annual capacity to produce nearly 1.65 million tonnes of urea.
Sources said Omifco exports urea to India at a pre-determined price under a long-term contract, which undergoes minor revision every year. "However, a substantial increase in one go is a big issue. This has to get approval from the fertilizer ministry, Prime Minister's office and probably the cabinet committee," noted a source, on condition of anonymity.
© Times of Oman 2012
