RCF rejects swapping KG-D6 gas with ONGC's

State-run Rashtriya Chemicals and Fertilizers (RCF) has rejected swapping its KG-D6 gas for Oil and Natural Gas Corp's (ONGC) C-Series gas saying fuel from Reliance Industries' fields was cheaper and at better terms.

After its allocation far exceeded what RIL could produce from KG-D6 fields, the oil ministry planned to shift RCF's plants in Uran region of Maharashtra so that the cheaper gas could go to non-core users.

"RCF rejected the offer as ONGC gas was not just costlier but also came at very low pressure, creating problems at its urea plants," a fertiliser ministry official said.

The oil ministry had projected delivered price of ONGC's western offshore C-Series fields at $6.03 per million British thermal unit in Uran region where RCF's Thal plant is located, as against $6.97 per mmBtu of KG-D6 gas.

He said the oil ministry had made wrong projections as the burner tip price of KG-D6 gas supplied to RCF was USD 6.72 per mmBtu while C-Series gas, if marketed by ONGC, will cost the urea-making plant $6.78 per mmBtu.

If state-run gas utility GAIL was to sell the gas, RCF, which buys about 3 million cubic metres a day of KG-D6 gas for its Trombay and Thal units, would pay $6.87 per mmBtu.

While the base price of RIL's eastern offshore KG-D6 gas it $4.205 per mmBtu, the same for ONGC's C-Series field is $5.25 per mmBtu.

Also, the pressure of gas from the C-Series fields was "much lower", causing problems at urea plant, he said.

The terms of supplies from RIL are much more lucrative than those of ONGC or GAIL, he said, adding that any firm unable to take its allocated quantity of gas from KG-D6 is allowed to make up for the shortfall in one year's time.

RIL also gives a four-month grace period beyond the contract period, ending March 31, 2014, to make up for any allocated gas the consumer may not have been able to take. On the other hand, ONGC/GAIL contracts do not have provisions for making up for gas consumers may have not been able to take.

The oil ministry's move to shift plants like RCF follows its allocations far exceeding the supplies from KG-D6. While it has identified users for about 64 mmscmd of KG-D6 gas, RIL says it can produce only 60 mmscmd on a sustained basis.

ONGC is to produce between 2.1 and 3 mmscmd from the C-Series fields.

While sales of KG-D6 gas amount to inter-state sales, attracting a central sales tax of 2 per cent, ONGC gas sales would attract Maharashtra government sales tax.

The gas vacated by RCF would go to companies like Essar Oil's Vadinar oil refinery in Gujarat, which has so far not been able to sign a contract with RIL for the 0.6 mmscmd that was allocated to it.