RIL D6 output on EGom agenda

Govt panel to take up gas production issues on June 9; HC hearing on Essar challenge today.

The controversy surrounding falling production from Reliance Industries Ltd’s D6 field in the Krishna-Godavari (KG) basin is heading for a hearing by an empowered group of ministers on June 9. The EGoM, headed by finance minister Pranab Mukherjee, is expected to ratify the decision of the ministry of petroleum and natural gas on supply cuts for non-core users.

The meeting has been called following an Essar Steel plea in the high court here, that since gas allocations were made in accordance with the EGoM decision, any supply cut should also have the stamp of the group. The case is scheduled for a hearing tomorrow.

In an order dated May 18, the ministry of petroleum and natural gas had told steel, refinery and petrochemical units that “priority of allocation when the production of gas was going up has to be maintained even when the production is going down, in line with the gas utilisation policy”. The ministry has twice told RIL that the priority of supply has to be maintained in the order of fertiliser, cooking gas, power and city gas distribution. Besides these sectors, RIL is allowed some quantity for maintaining pressure in its pipeline.

Senior officials said while supply cuts would dominate the agenda, the EGoM could also take up the issue of fall in RIL production from a peak of 60 million standard cubic metres a day (mscmd) in March 2010 to about 50 mscmd currently.

"This could cause trouble for the contractor (RIL)," said the official. Though the ministry of petroleum and natural gas and the upstream regulator, the Directorate General of Hydrocarbons, have held several rounds of meetings with RIL on this, the latter has not come back with any firm commitment on scaling up of production.

The priority sectors have been allocated close to 47 mscmd of KG-D6 gas, leaving very little for non-core users. Essar Steel, whose supplies have come down to a fifth of the contracted volumes, has challenged the petroleum ministry's decision, saying only the EGoM was competent to take such a decision. The HC has so far not stayed the decision but if it directs the petroleum ministry to get the decision ratified by the EGoM, the June 9 meeting will serve that purpose, sources said.

The power ministry has sought allocation for nine projects, including NTPC's Kawas Station-II (1,200 Mw), Gandhar Station-II (1,300 Mw) and RGCCPP-Kayamkulam Station-II (1,050 Mw). However, the EGoM is not in a position to make fresh allocations.

Besides D6 production, the EGoM would also be considering allocation for about three mscmd from the western offshore C-Series fields of state-owned Oil and Natural Gas Corporation.

Besides Essar Steel, those affected by the cuts are Welspun Maxsteel, Vikram Ispat, Indian Oil Corporation and RIL itself.

The ministry’s order has also directed these companies to meet their demand through imported LNG. “While it is a fact that the price of imported LNG is higher than the domestically produced natural gas, such sectors should not be dependent on low cost gas for their survival in the market, since these sectors operate in a decontrolled scenario,” said the order.