Uncertainty still looms over KG-D6 gas sales pact

Uncertainty still looms over the signing of new gas sales purchase agreement (GSPA) between Reliance Industries (RIL) and consumers of KG-D6 gas, with the existing agreements expiring today. Currently, RIL supplies 13.5 million metric standard cubic metre per day (mmscmd) to 16 fertiliser units.

According to industry sources, there is likely to be an extension of the existing contract until the new pricing comes into existence. However, a decision in this regard is to be taken till 7 pm in the evening.

RIL is likely to come up with a simplified gas supply pact term sheet to buyers that would be valid till it is replaced by a new pact once the pricing gets doubled to $8.4 per unit (million metric British thermal unit).

The government had come out with a notification clearing the election commission decision to hold the gas price hike as per the Rangarajan formulae last week.

Interestingly, out of the 10 contentious issues, the buyers and sellers had sorted out nine issues, keeping hopes alive of a continuous supply. The only issue remaining was regarding the marketing margin.

"Moreover, both the parties will not like to stop supply as it means wastage of gas by flaring it up," said an official source close to the development.

While RIL wanted to sign new GSPAs on a quarterly basis, it later bowed down to the demand by fertiliser majors for a long-term deal of either one year or five years.

The key features of the proposed GSPA Term Sheet by RIL include: (i) No Take or Pay obligation on the Buyers i.e. Buyers to pay only for the quantity supplied by the Seller (ii) Gas Prices as notified by the Govt under the PSC (iii) Sellers responsible for quality specs of Gas (iv) In periods of constraints, gas to be supplied on pro-rate basis to all fertiliser buyers (v) key terms like invoicing, payments, LC etc are similar to GSPA signed in 2009, the company said in a statement recently.

Currently, there are 50 GSPAs for KG-D6 gas in the liquefied petroleum gas, fertiliser, power and city gas sectors; these were signed in 2009. Of these, fertiliser companies account for 16, while 28 are with power companies and remaining include city gas distribution entities.