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September 16 2019
India gives Oman nod to hike gas price for fertilizer plant
28 April 2012

To ensure uninterrupted supply of urea to the Indian market

The Union Cabinet is understood to have cleared the proposal by Oman to hike the gas price for an Indian fertilizer plant in the Gulf nation to $1.5 per million metric British thermal unit (mmBtu), a move that will ensure uninterrupted supply of urea to the Indian market.

The government's approval of the gas price hike will lead to dropping of the move to challenge the move by Oman at the International Tribunal in London.

Cabinet clearance

“The Cabinet cleared the proposal to accept the hike in gas price supplied by Oman to the Oman India Fertilizer Company (OMIFCO) plant in Sur (Oman) to $1.5 per mmBtu with an annual increase of $0.5 mmBtu,” official sources said.

It accepted Oman Government's condition that it would increase gas prices by $0.5 per mmBtu every year up to $3 per mmBtu.

The proposal was moved by the Fertilizer Ministry as it required Cabinet's approval for a change in the agreement between the two countries.

Oman had contracted to sell gas to the plant at $0.77 per mmBtu for 15 years beginning 2005 but mid-way decided to hike rates to $3 per mmBtu from January 1, 2012 citing firming up of prices in the global market.

Oman India Fertilizer Company (OMIFCO), a joint venture of Oman's state-owned Oman Oil Co (OCC) and Indian co-operative firms KRIBHCO and IFFCO, produces about 2 million tonnes of urea a year at Sur for exports to India. IFFCO and KRIBHCO hold 25 per cent stake each in OMIFCO, while the balance is with Oman Oil Company.

The Ministry was in favour of accepting the hike because even at $3 per mmBtu, the gas supplied by Oman is cheaper than alternative fuel sources.

Gas supplies

Long-term gas supplies in the international market are no less than $18 per mmBtu. OMIFCO ships around two million tonnes of urea, which is its entire production, to India under an agreement the country has with the Oman Government.

 

 

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