Reliance cannot use its own gas immediately

Mukesh Ambani-run Reliance Industries may not be immediately able to use natural gas from its KG-D6 fields as the government has decided to allocate the fuel to its refinery and petrochemical plants, along with steel firms only when the output rises beyond 40 mmscmd.

While the government has already distributed the initial volumes, mostly among fertiliser and existing power plants, the demand for fuel by petrochemical plants, refineries and steel sector could be accommodated only when output increases over 40 mmscmd in 2010, official sources said.

Quoting the decision of the Empowered Group of Ministers (EGoM) on Gas, which met on January 8 under the chairmanship of External Affairs Minister Pranab Mukherjee, sources said it was noted that decisions regarding supply of gas to the three sectors, including downstream units of RIL, could be taken only when the production from KG-D6 basin increases.

Sources said EGoM has decided that 14 million standard cubic meters per day gas from the initial output would go to fertiliser units. Thereafter, the existing power plants will get 18 mmscmd, including up to 8.5 mmscmd to the beleaguered Dabhol power plant.

Even as the government has set its priority for gas allocation, Steel Minister Ram Vilas Paswan wants steel sector to be included in it, depending on availability of the fuel.

“After the government is left with surplus natural gas, it should think of including steel in the list of priority sector for allocation,” the minister said.

Paswan, who also heads Fertilisers and Chemicals ministries, had recently written to Oil Minister Murli Deora for adequate gas allocation to Essar Steel, Ispat Industries and Vikram Ispat, which have gas-based units.

Of its total earmarked quantity of 5.76 mmscmd, the trio gets 23.42 per cent of the gas from GAIL at present.

Ruias-led Essar Steel alone requires 6 mmscmd of gas, for which it has separate arrangements with GAIL and other public sector oil companies. However, against an agreement for 3.1 mmscmd from GAIL, it is currently receiving only 20 per cent (0.66 mmscmd) of the earmarked quantity.

Making it even more difficult for the steel major, the PSU oil companies like IOCL, BPCL and GSPCL have asked it to curtail the supply to 0.87 mmscmd, against 3.1 mmscmd from this month.

Ispat Industries, too, is understood to be getting only 40 per cent of its earmarked gas quantity.