RIL refuses to obey order on gas allocation

Upping its ante against the oil ministry, Reliance Industries Ltd (RIL) has said it cannot give natural gas to new customers by cutting supplies to power and fertiliser plants.

Stating that the ministry’s order was in violation of the gas utilisation policy, RIL has suggested that a panel of ministers should discuss the matter.

The oil ministry had on July 12 written to RIL asking it to make a “pro-rata” cut in gas supplies to all existing customers if the production from its eastern offshore KG-D6 fields cannot support new customers.

Users awaiting signing of Gas Sales and Purchase Agreements (GSPAs) include state-run NTPC (1.14 million standard cubic meters per day (mscmd), Essar Oil’s Vadinary refinery in Gujarat (0.6 mscmd), Oil and Natural Gas Corp’s LPG units (0.406 mscmd), Rithala power plant in Delhi (0.4 mscmd) and Bawana power plant (0.93 mscmd).

RIL, however, says it can only sign contracts to supply another 2.2 mscmd on firm basis, as it does not want to sign pacts for commodity it does not have.

RIL on July 15 wrote to Petroleum Minister Murli Deora saying it had not signed contracts to supply KG-D6 gas with new customers, as they were not ready to receive gas when available and so allocation made to them has lapsed.

The gas utilisation policy, as framed by an Empowered Group of Ministers (EGoM), provides for no reservation of gas. Users who said they would be able to take gas before end of 2009-10 were allocated. However, not all those allocated gas were in a position to take it by the appointed date.

“All allocations that have not been signed on account of the customers not being ready to receive gas when available or lacking in the necessary pipeline connectivity cannot claim to have any quantity reserved for them,” it wrote in the letter, a copy of which was also marked to Finance Minister Pranab Mukherjee.

RIL’s KG-D6 fields can sustain a production of only 60 mscmd) and the company has already signed or committed to sign GSPAs for 57.8 mscmd.

Against the availability of 60 mscmd gas, the oil ministry has allocated about 64 mscmd and wants RIL to sign GSPAs with all those who have been allocated gas.

“On the day that KG-D6 production is not sufficient to cater to all the consumers with firm allocation, pro-rata cuts should be imposed on all firm consumers,” the ministry wrote to RIL on July 12.