Hindustan Oil Exploration Company which is the operator of PY-1 gas field in Cauvery Basin expects commercial production of natural gas from this field to commence from mid 2009. The company has already placed major contracts including construction of an offshore production cum well head platform, 56 km sub sea pipeline and on shore gas processing terminal. The construction of gas terminal is progressing at Pillai Perumal Nallur village in Tamil Nadu and similarly the work on offshore platform is progressing at LaemChabang yard in Thailand. According to S. K Sinha, DGM – Gas Marketing, Gail India this will improve the gas demand-supply situation in Tamil Nadu. Currently GAIL is supply about 35 lakh SCMD compared to 60 lakh SCMD linkage.

The PY-1 gas field is expected to supply about 3 mmscd of gas and HOEC has already signed a gas supply agreement with PPN Power Generating Company, an existing independent power plant located in Tamil Nadu for sale of upto 51,000 mmbtu per day of gas from this field. The Gas price is fixed at USD 3.75/mmbtu for year 1 and 2 then increasing to USD 3.85/mmbtu in year 3 and 4, USD 3.95/mmbtu for year 5 and 6 and negotiated price thereafter. Minister for Electricity, Government of Tamil Nadu on his speech inaugurating the Energy & Environment meet organized by FICCI quoted that supply of gas from PY-1 field to PPN Power Gen will save about Rs 1000 crore for Tamil Nadu Electricity Board.

Another 5 MMSCD of gas will also be available from 2010-11 from CY-OS/2 field for which Hardy Oil & Gas is the operator with 75% participating interest. GAIL which holds the balance 25% of the participating interest enjoys full marketing rights of the production of this block. PY-1 gas field and PY-3 oil field which are contained with in CY-OS/2 block was ring fenced with separate PSC now.