RIL inks pact to sell gas from KG-D6 to Indo Gulf Fertilizer

Reliance Industries has signed an agreement to sell natural gas from its flagging eastern offshore KG-D6 fields to Indo Gulf Fertilizer Ltd's Jagdishpur plant.

RIL signed a Gas Sales and Purchase Agreement (GSPA) to sell 0.228 million standard cubic metres per day of gas to Indo Gulf's Jagdishpur plant, industry sources said.

However, supplies are yet to begin as Indo Gulf is still negotiating an agreement to transport gas through state-owned GAIL India Ltd's pipelines.

Sources said RIL is also to sign a GSPA to sell 0.27 mmscmd of gas to fertiliser cooperative IFFCO's Phulpur plant.

The government had last year allocated KG-D6 gas to the two urea manufacturing units but a GSPA could not be signed due to differences over sales tax liability.

The new agreements are likely to result in a cut in supplies to LPG extraction plants of GAIL. So far, the dwindling gas supplies from KG-D6 had been just enough to meet contracted demand for fertiliser and LPG units.

At current production of under 17 mmscmd, supplies to power plants had already been snapped. Since last week, none of the 25 power plants that were allocated gas from KG-D6 fields, are getting any supplies, sources said.

Of the present production, about 15.2 mmscmd was supplied to top priority urea-making fertiliser plants and the rest was consumed by state-owned GAIL India Ltd's LPG extraction units.

This left no gas for power plants, which are placed third on the priority list of consumers receiving KG-D6 gas.

Sources said GAIL's LPG plant is getting about 10-15% gas less than its allocation of 2.59 mmscmd. Once Jagdishpur and Phulpur too start drawing fuel, supplies would dwindle further.

The Bay of Bengal KG-D6 fields, which began gas production in April 2009, had hit a peak of 69.43 mmscmd in March 2010 before water and sand ingress led to shutting down of more than one-third of the wells.

This peak output comprised of 66.35 mmscmd from Dhirubhai-1 and 3, the largest of the 18 gas discoveries on the KG-D6 block, and 3.07 mmscmd from MA field, the only oil discovery on the block. MA field hit a peak of 6.78 mmscmd in January 2012.

The output from D1&D3 and MA field has since fallen to 16.9 mmscmd.

Sources said when KG-D6 gas production began to dip sharply, the government in 2011 ordered a pro-rata cut in supplies to 25 power plants which had an original allocation of 28.90 mmscmd of gas. But there was no cut in the 15.668 mmscmd allocation to 16 fertiliser plants, who were given top priority in gas allocation.