Reliance Industries Ltd has signed gas sales and transportation contracts with the 12 goveernment-approved fertiliser companies that had been hand-picked by a group of union ministers to be the first to receive natural gas from RIL's Krishna-Godavari fields.

The gas sales and purchase agreements (GSPAs) were signed with the Indian Farmers Fertiliser Co-operative (Iffco), Krishak Bharti Co-operative (Kribco), Tata Chemicals, Indo Gulf Fertiliser, National Fertiliser, Chambal Fertiliser, Gujarat State Fertiliser, Rashtriya Chemical Fertiliaer, Nagarjuna Fertiliaer, GNFC, and Sriram Fertiliser. They will buy KG-D6 gas at $4.20 per million British thermal units (mBtus).

The fertiliser companies also signed a separate gas transportation agreement with Reliance Gas Transportation India for transporting the gas through its 1,396-km east-west pipeline from Kakinada in Andhra Pradesh to Baruch in Gujarat.

RIL has earlier said that KG-D6 would start producing gas by early April. The initial volumes would go to meet the fuel deficit at 15 urea making plants operated by the 12 fertiliser companies.

Eight urea plants on the Hazira-Vijaipur-Jagdishpur (HVJ) pipeline of GAIL India, which transports fuel from the Gujarat coast, would get 7.026 million standard cubic metres per day (mmcmd) of gas, while 6.689 mmcmd would go to Kribco and GSFC's units in Gujarat, Rashtriya Chemicals' Maharashtra plants, and Nagarjuna Fertiliser in Andhra Pradesh. On the HVJ, National Fertilizers will get 0.65 mmcmd, Chambal Fertilizer 1.15 mmcmd, and IFFCO's Aonla and Phulpur units in Uttar Pradesh 1.75 and 0.52 mmcmd, respectively.

The GSPA envisages supply of D6 gas at a landfall price of $4.2 per mBtu. This price excludes pipeline transmission tariff, marketing margin, and state levies. The gas is expected to be available to customers in Andhra Pradesh such as Nagarjuna Fertilisers' Kakinada plants at $5.7-5.8 per mBtu and those in Maharashtra and Gujarat in the region of $6 per mBtu. RIL has levied a marketing margin of 13.5 cents per mBtu.

Though the transmission tariff is to be decided by the Petroleum & Natural Gas Regulatory Board, RGTIL has indicated a range to its customers. The tariff would be levied on the volume of the gas and could range from $0.17 to $0.45 within Andhra Pradesh and $0.93 outside the state.

The initial production from the D6 block is estimated at 40 mmscmd, of which 15 mmscmd is to be supplied to the fertiliser sector. RIL plans to start production with 10-12 mscmd of gas. This will be raised to 40 mmscmd by July and reach peak production of 80 mscmd in a year.

P M S Prasad, president and chief executive (petroleum), RIL, told the media in New Delhi that the supply of D6 gas to these units would help enhance the country's urea production by approximately seven million tonnes per annum from the existing 20 mt.

''We expect this to reduce our fertiliser subsidy bill by Rs2,000-Rs3,000 crore annually,'' Atul Chaturvedi, secretary, department of fertilisers, added.

Petroleum secretary, R S Pandey said that a separate agreement between GAIL and fertiliser companies for transporting D6 gas through the public sector gas transporter will be signed shortly. This will facilitate supply of the gas to customers in the North including IFFCO and National Fertilisers.

As regards an agreement with the power companies for gas supply, Prasad said, ''We are waiting to get a list of power companies and then initiate talks. We have already sent a aft agreement for Ratnagiri Gas and Power Pvt Ltd (in Maharashtra).