Mukesh rejects Deora order on KG gas supply
Mumbai, July 20: Mukesh Ambani’s Reliance Industries has refused to supply natural gas to new customers, which it had been directed to do by the petroleum ministry. Last week, the oil ministry instructed RIL to cut part of the supplies on a pro-rate basis to its existing customers if the current gas production from the KG basin was insufficient for all customers.
In a letter to the ministry, RIL is learnt to have stated that the ministry’s order runs against the gas utilisation policy and has asked for a meeting of the ministers on this.
Industry sources feel that this posturing could be a pressure tactic to get a quick approval to develop other gas fields in the region. RIL had applied for permission to develop two satellite fields around KG-D6 some months back, which is yet to be approved — possibly because of cost.
RIL is currently producing 60 million cubic meters/day (mmscmd) of gas from the D6 block, against the 80 mmscmd that it is permitted to. On the customer front, RIL has already signed firm agreeements to sell 57.8 mmscmd of this gas. However, the total volume of gas assigned by the petroleum ministry to various customers adds up to 64 mmscmd. In its reply to the ministry, RIL is also understood to have said that the utilisation policy doesn’t allow for ‘reservation’ of gas. If a customer isn’t in a position to take the delivery by a certain date, the allocation also lapses.
A company source says that drawing out extra production from the field may shorten its life. Production from the field could be increased in the future, but not now, the source added. In such a scenario, fast track approval for development of new gas fields may be the only option available to the government if it wants more gas for the industry.
A possible benefit for RIL from the deal, could be in the form of higher returns. This is because the $4.24/unit price of natural gas now is valid only for five years. It will need to be reset in the future - and could be higher as capital expenditure for the project goes up.
Some of the users who are still waiting to sign gas purchase agreements with RIL include NTPC, Essar Oil’s Vadinar refinery and LPG plants owned by ONGC.
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