Much ado on RIL gas today

Solution to gas sales purchase agreement deals with buyers likely; SC to also give verdict on hurdle for arbitration panel in tussle with govt

It will be an action-packed Monday for the Mukesh Ambani-led Reliance Industries and for the gas produced from its KG-D6 block in the eastern offshore.

A solution to the fight over signing of a new gas sales purchase agreement (GSPA) between the company and its consumers is likely, with nine of the 10 contentious issues between RIL and buyers resolved. Also, a Supreme Court Bench headed by S S Nijjar is likely to come up with a verdict on the appointment of a third arbitrator, over a tug-of-war between the government and RIL. The company was batting for a foreign, neutral, arbitrator to head the three-member panel.

This at a time when its foreign partners, British oil major BP and Canada's Niko, have served arbitration notices to the government, formally joining hands with RIL against a battle over imposing penalties over a drop in production.

Extension of GSPAs likely

The current GSPAs expire on Monday. "Most likely, there might be an extension of the existing agreements. On Monday, we will be having discussions with RIL and will find a solution, too. With clarity on the pricing issue, too, a deal might be struck soon," said Satish Chander, director-general of the Fertiliser Association of India (FAI). RIL is likely to come up with a simplified gas supply pact term sheet to buyers that would be valid till replaced by a new one.

Last Friday, Petroleum Minister M Veerappa Moily had written a letter to the Director-General of Hydrocarbons to maintain status quo on pricing. This came after the Election Commission showed a red flag on raising the prices of domestic natural gas from $4.2 a million British thermal units to $8.4 a unit. More, both buyers and sellers have issues regarding the marketing margin. While RIL wanted to sign new GSPAs on a quarterly basis, it later bowed to the demand from fertiliser majors for a deal of either one year or five years. "The new GSPAs might well be for a one-year term," said an official close to the development.

Currently, there are 50 GSPAs for KG-D6 output in the liquefied petroleum gas, fertiliser, power and city gas sectors; these were signed in 2009. Of these, fertiliser companies account for 16 and 28 are with power companies. Only four of the 28 GSPAs signed with power companies were executed. RIL did not respond to the queries by Business Standard in this regard.

Third arbitrator jigsaw

The government has so far imposed a penalty of $1.797 billion on RIL for production shortfall in 2010-11, 2011-12 and 2012-13. The arbitration process was stuck over appointment of a third member in the panel. RIL and the government had, respectively, nominated former chief justices S P Bharucha and V N Khare but the two sides were divided on whether or not the third arbitrator should be a foreigner.

BIG DAY FOR RIL

* A solution to the fight over signing of a new gas sales purchase agreement (GSPA) between the company and its consumers is likely, with nine of the ten contentious issues between RIL and buyers resolved

* A Supreme Court Bench headed by S S Nijjar is likely to come up with a verdict on the appointment of a third arbitrator, over a tug-of-war between the government and RIL

* The company was batting for a foreign, neutral, arbitrator to head the three-member panel

* The current GSPA will expire on Monday