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RIL may sell gas to RNRL at $4.20 for shorter duration
May 07, 2010 14:03 IST

Mukesh Ambani-led Reliance Industries [Get Quote] on Friday said it may sell gas from its KG-D6 fields to RNRL at $4.20 per mmBtu if the government allocates fuel to the Anil Ambani Group firm.

It also said that the tenure of gas supply will have to be drastically cut from 17 years as being sought by RNRL.

Soon after the Supreme Court ruled that the private Ambani family MoU cannot over-ride the government's right to fix price and approve utilisation of gas and asked the two firms to renegotiate fuel supply, RIL executive director P M S Prasad told PTI that the terms of supply would have to be guided by government's pricing and utilisation policy.

"The price will be what government has fixed... supplies will be subject to government allocating the fuel (to RNRL or its affiliate company) and the tenure of supply will have to be in line with development plan approved for the KG-D6 fields," he said.

In the 2005 family MoU and the January 2006 Gas Supply Master Agreement (GSMA), RIL was to supply 28 million standard cubic meters per day of gas to RNRL for 17 years at $2.34 per million British thermal unit.

The gas was sought by RNRL to fire its proposed 7,800 MW power plant in Dadri, Uttar Pradesh. However, the Government in September 2007 approved a price of USD 4.20 per mmBtu and prioritised existing fertilizer and power plants.

Future plants like the proposed Dadri power plant of Anil Ambani group near Delhi was to be considered for allocation when the plant comes up. Prasad said RIL would renegotiate the GSMA in line with the government policy.

"The price will have to be $4.20 per mmBtu and the tenure shorter." Dhirubhai-1 and Dhirubhai-3 field in KG-D6 block, which have been in production since April last year, have been approved to produce for 9 years and supplies to customers including RNRL or its affiliate would have to be in line with the approved plan.

The Dadri plant may not come before three years and practically supplies cannot be for more than five years. Prasad said the Supreme Court has upheld the company's position that government has a right to approve the price of gas and fix its customers.

"It is a total vindication of what RIL has been saying all along that this gas sector is regulated by the government and we have to work within the ambit of the government policies," he said.

"Gas utilisation policy and prioritisation of customers is beyond doubt and that has been upheld by the supreme court and we have to work within the ambit of this policy." He said the court has also said that Ambani family MoU was not legally binding on RIL. The court has further said that we should renegotiate the agreement with the EGoM decision and production sharing contract, the government policy and that is what we are going to do," Prasad said, adding that the apex court had given six weeks to initiate the process and report to company court after eight weeks.

"So that is what we have to do," he said. Prasad said RIL has been saying that a contractor discovers market price and the government holds the right to reject it or approve it with changes.

"That right (of government) we never contested," he said. On the marketing freedom to operators, the Supreme Court said it is not absolute, he said.

"We have to be within the utilisation policy for the larger good of the nation." RIL is currently producing 62-63 million standard cubic meters per day from KG-D6.

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