OilMin resends query on CBM gas pricing to RIL
On July 12, the Ministry had asked the company to explain the fixed component in the pricing formula
In a move seen as delaying tactics, the Oil Ministry has posed a query to Reliance Industries on its CBM gas pricing that is a repeat of a question the firm had replied to over two months back.
Days before a 60-day deadline for approval of RIL's import parity pricing of gas to be produced from below coal-seams (CBM) expired, the Ministry on July 12 asked the company to explain the fixed component in the pricing formula, sources said.
The query on inclusion of $0.26 per million British thermal unit in the formula is repeat of what the ministry had asked RIL on April 24.
RIL had on February 21 submitted a proposal seeking a price of equivalent to 12.67% of price of JCC, or Japan Customs-Cleared Crude oil, plus $0.26 per mmBtu, for the CBM it plans to produce from Madhya Pradesh blocks from end-2014.
In response to the Ministry's April 24 query, RIL on April 26 sent a detailed 6 page reply stating that the CBM contract provides for pricing the gas at best available arms length rate for similar sales in the region.
Sources said RIL stated its proposed formula is exact replica of the rate paid by customers in the region for purchase of imported liquefied natural gas (LNG) on a long term contract.
CBM contract provides for approval of the sale price formula within 60 business days "from the date of receipt of proposal or from the date of receipt of clarifications / additional information".
The Ministry's April 24 clarifications pushed back the approval clock by another two months and the same thing has happened with the recent July 12 query.
Sources said RIL had in February called for open offers for price discovery according to the formula after informing all the concerned ministeries of power, fertiliser, chemical and petrochemical besides oil.
Neither oil ministry nor any other ministry or state government raised any objections to call for offers for price discovery.
The delay in the CBM price approval is seriously hampering the development and production of CBM which would annually substitute imported liquid fuels worth about $1 billion or substitute $650 million of LNG imports, sources said.
RIL got a demand of 20.63 million standard cubic meters a day (six times the gas available for sale) in the open bids called in February based on which the company sought approval of the formula.
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