REGULATORY & JUDICIAL DEVELOPMENT – INDIA
M/s Sanwaria Gas Ltd. v. Union of India & Others
March 2, 2015
The Petroleum and Natural Gas Regulatory Board (PNGRB) considered whether the contiguous areas of Govardhan and Vrindavan could be authorized to M/s Sanwaria Gas Ltd. as part of the Mathura Geographical Area.
The Board observed that the Mathura Geographical Area had been awarded through a competitive bidding process and was clearly demarcated at the time of bidding.
PNGRB held that:
- Issues relating to contiguous geographical areas must be raised during the bidding stage.
- The Board has no authority to alter geographical boundaries after bid finalization.
- Economic viability concerns should have been addressed before submission of bids.
Accordingly, the request for extension of authorization to Govardhan and Vrindavan was rejected and the complaint was dismissed.
FEATURE
Make-Up Gas Under Gas Sales Agreements (GSA)
Make-Up Gas provisions under a Gas Sales Agreement enable buyers to recover gas quantities for which take-or-pay payments have already been made in previous contract years.
These provisions serve as an important balancing mechanism allowing buyers to moderate long-term take-or-pay obligations arising from unpredictable operational requirements.
Key characteristics of Make-Up Gas include:
- Recovery of prepaid gas quantities in future contract years.
- Creation of a notional Make-Up Gas account.
- Zero contract-price invoicing during recovery.
- Chronological recovery of accrued entitlements.
- Subject to seller operational flexibility and contractual limitations.
The ability to recover Make-Up Gas may be restricted by physical delivery constraints or contractual limitations, including annual take-or-pay quantity requirements.
Gas Sales Agreements should also specify:
- Time limits for exercising Make-Up Gas rights.
- Price adjustment mechanisms.
- Seller compensation provisions during rising gas-price environments.
- Treatment of liquidated damages and take-or-pay obligations.
Make-Up Gas represents recovery of gas quantities already prepaid by the buyer under take-or-pay commitments and therefore acts as an essential contractual safeguard within long-term gas supply arrangements.
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SOURCES
- Norwegian Petroleum Directorate
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- The International Energy Agency
- Organisation of the Petroleum Exporting Countries
- The Oil and Gas Journal
- Official Websites of Various Oil & Gas Companies
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DISCLAIMER
The information in this private circulation is not legal advice and should not be treated as such.
The information is sourced from public domain materials and is intended solely for private and non-commercial purposes.
No representation is made regarding the accuracy, completeness or reliability of the information provided.
This disclaimer shall be governed by and construed in accordance with the laws of India and any disputes shall be subject to the exclusive jurisdiction of Indian courts.
Doc ID: 7O&G15
