Rangarajan to review CBM proposals of RIL, Essar

Oil Min has been trying since July to get a committee to vet separate price proposals of RIL and Essar but had not succeeded so fa

Prime Minister's Economic Advisory Council Chairman C Rangarajan has been asked to scrutinise the coal-bed methane or CBM pricing proposals of Reliance industries and Essar Oil.

This follows Oil Minister S Jaipal Reddy last month writing to the Prime Minister Manmohan Singh seeking formation of a committee of secretaries or PMEAC Chairman examining CBM price proposals of RIL and Essar, an official said here today.

"Rangarajan has been asked to examine the price proposals," he said.

The Oil Ministry has been trying since July to get an Empowered Committee of Secretaries (ECS) to vet the separate price proposals of RIL and Essar but had not succeeded so far.

The official said Reddy last month wrote to Prime Minister saying the issue of pricing of natural gas to be produced from below coal seams, called CBM, would be submitted to the Cabinet Committee on Economic Affairs (CCEA) for consideration.

But, before that, the price proposals need to be either scrutinised by a Committee of Secretaries headed by Cabinet Secretary or by the Prime Minister's Economic Advisory Council Chairman C Rangarajan, Reddy wrote to the Prime Minister.

While Essar has proposed to price CBM from its Raniganj block in West Bengal at $4.2 per million British thermal unit, RIL for its Sohagpur CBM blocks in Madhya Pradesh wants a rate equivalent to the price at which India imports gas.

The Oil Ministry is willing to go with Essar proposal to sell gas from Ranigang block to Matix Fertilizer and Chemicals at $4.2 per mmBtu even though the Directorate General of Hydrocarbon (DGH) opined that the two were related parties.

In case of RIL, the ministry is unwilling to accept a rate of $12.93 per mmBtu at $100 a barrel oil price. The DGH had in April recommended acceptance of this price as it was arrived on an arms-length basis. But on June 22 it said the price was not in conformity with the government policies.

RIL wants to price CBM gas at 12.67% of JCC, or Japan Customs-Cleared Crude, plus $0.26 per mmBtu. At $100 per barrel oil price, gas will cost $12.93 per mmBtu.

The formula proposed by RIL is the same at which Petronet LNG Ltd, the nation's largest liquefied natural gas importer, buys 7.5 million tonnes per annum (30 million standard cubic meters per day) of LNG from RasGas of Qatar.

RasGas charges 12.67% of JCC and Petronet, which is headed by Oil Secretary, pays a further $0.26 per mmBtu for shipping the gas in its liquid form (LNG) from Qatar.