The government will not intervene in the pricing of gas from Reliance Industries''
KG basin field as the new exploration policy guaranteed market-determined prices
to companies taking the risk of investing in the country''s oil and gas sector,
petroleum minister Murli Deora said.
Ambani-controlled RIL has proposed to sell gas from the KG offshore gas fields
at a price between $4.58 and $4.33 per million British thermal units (with the
dollar on a Rs41-Rs45 band).
petroleum minister''s assurances come amidst reports that in view of the opposition
to RIL pricing, a committee of secretaries is looking into the issue.
the New Exploration Licensing Policy (NELP), successive governments - first the
NDA government at the centre and then the UPA - had promised marketing freedom
to companies investing in the country''s oil and gas exploration sector. To impose
price cap on gas after RIL announcing plans to start production from July 2008,
would be reneging on the signed contract for the KG-D6 block and would not stand
scrutiny of any court, official sources cited Deora as telling Andhra chief minister
Y S Rajasekhar Reddy.
block was awarded to RIL in the first round of global bidding under NELP in 2000.
declined to consider Reddy''s suggestion for the government to take physical delivery
of its share from the KG-D6 block as the volumes may vary from year to year and
would require the government setting up infrastructure for that.
letter written by the power ministry to the petroleum ministry challenging Reliance
Industries (RIL) gas pricing formulae, however, contrasts Deora''s claim.
understand, RIL is (a) targeting to charge $4.5 MMBTU of gas and (b) is seeking
the approval of MOP&NG for a fuel pricing formula. You would agree that these
moves of RIL are not in public interest and require further serious deliberations
involving all stakeholders," the letter said.
letter also says that the government will take its share of KG gas called ''profit
gas'' in kind and not in cash. RIL must also supply 2.1 million metric tonnes of
gas every year to feed the Dabhol Power plant. Earlier the PMO had echoed similar
committee of secretaries headed by the cabinet secretary is now looking at the
But, with such apprehensions being openly expressed about the gas formula, it
is becoming increasingly clear that RIL''s price formula is unlikely to be accepted
as it stands.