EGoM may name more buyers for K-G gas

Power sector likely to get at least half of the firm allocation, many claimants for the rest

The new empowered group of ministers (EGoM) on K-G basin gas is likely to finalise consumers for an additional 20 million metric standard cubic metres of gas a day (mmscmd) from the D6 block of Reliance Industries Ltd (RIL), including some for the latter’s own refineries and petrochemical plants. The EGoM, in its first meeting tomorrow, is also expected to consider allocating another 30 mmscmd of gas on a fallback basis to various sectors.

The Union government has the power to decide who will get gas from any source, and the price, too. The latter was fixed in 2007 for five years.

While the power sector will get over half of the 20 mmscmd for which firm allocation will be made, the rest is expected to be distributed among other consumers. The ministry of petroleum and natural gas’ proposal for a total of 19.64 mmscmd gas for RIL plants is the highest one for any single company.

The group, headed by finance minister Pranab Mukherjee, is meeting at a time when the Supreme Court is hearing the gas dispute between the two Ambani brothers (wherein Anil Ambani is laying claim to gas supply of 28 mmscmd from the K-G basin under an earlier family agreement with elder brother Mukesh).

“Production from the basin can be ramped up to 60 mmscmd very soon from the current 40 mmscmd and it will eventually go up to 80 mmscmd. While the previous EGoM has already allocated buyers for the first 40 mmscmd, it is now expected to make firm allocations for the next 20 mmscmd. Beyond 60 mmscmd, allocations are likely to be made on a fallback basis for 30 mmscmd,” said a senior government official.

Sources said the total proposed allotment of D-6 gas for the power sector on a firm basis would be raised to 30.08 mmscmd from the existing 18 mmscmd, implying an increase of 12.08 mmscmd. Over and above this, power plants, including those to be commissioned in the current financial year, may be allocated an additional 11.99 mmscmd on a fallback basis.

The EGoM is also likely to allot 0.178 mmscmd to non-urea fertiliser plants producing subsidised fertilisers, 0.44 mmscmd to meet the remaining requirement of existing gas-based steel plants and 1.918 mmscmd as feedstock for two petrochemical plants of RIL.

Sources said the Department of Chemicals & Petrochemicals has proposed 1.168 mmscmd of gas to RIL’s Gandhar petrochemical plant in Gujarat and 0.75 mmscmd to its Nagothane plant in Maharashtra. The refining sector, including two refineries of RIL in Jamnagar, is likely to be allocated 5.384 mmscmd of firm supplies and an additional 6 mmscmd on a fallback basis.

Currently, eight refineries which have connectivity for receiving D-6 Block gas have a requirement of 22.8 mmscmd, including three of Indian Oil Corp Ltd, one each of Hindustan Petroleum Corp Ltd, Bharat Petroleum Corp Ltd and Essar Oil Ltd and two of RIL.

Indian Oil’s Koyali refinery has a requirement of 1.92 mmscmd, Mathura 0.81 mmscmd, Panipat 3.85 mmscmd, BPCL’s Mumbai refinery has 2.18 mmscmd, HPCL’s Mumbai Refinery 1.24 mmscmd and Essar Oil’s Vadinar refinery 1.57 mmscmd.

RIL has a total requirement of 11.23 mmscmd for its refineries. The company has been buying imported liquefied natural gas at 60 per cent premium to its D6 gas for captive use in its refineries, power plants and petrochemical units in Gujarat. Reliance was told by the previous EGoM that allocations will be considered when output from the KG Basin moved beyond 40 mmscmd.

Among the other fallback basis customers, city gas distribution projects are likely to get 2 mmscmd and captive power plants up to 10 mmscmd. “It is proposed that, amongst fallback customers, the requirement of the power sector would be met first and, thereafter, all the remaining customers should be supplied gas on a pro-rata basis,” the official said. “In the power sector, captive power plants would be supplied gas after optimally supplying gas to non-captive power plants,” he said.

Meanwhile, RIL today resumed supply of natural gas to Anil Ambani Group’s power plant in Andhra Pradesh after the company agreed to pay all charges on the fuel. “In view of you... Having paid the amounts due, including the marketing margin as per the last invoice... We propose to resume supply of gas with effect from October 26,” RIL wrote to Reliance Infrastructure Ltd last week.