Govt may contest HC verdict on RIL gas

The Centre is considering challenging the Bombay High Court's decision to restrain Mukesh Ambani-led Reliance Industries (RIL) from selling gas from its Krishna-Godavari (KG) basin block to any company other than NTPC and Anil Ambani's Reliance Natural Resources Ltd (RNRL) for the first eight years of production.

"We are the holders of the natural resources... Obviously we have not been consulted (on this issue)... We have the right to seek the intervention of the higher court," sources in the petroleum ministry said.

The Bombay High Court has asked RIL not to create third-party rights for the natural gas to be produced from its KG basin block in Andhra Pradesh for the first eight years starting 2008.

RIL plans to begin production from the block in July 2008, with initial output of close to 40 million standard cubic metre (mscmd) of gas per day. Peak output would touch 80 mscmd later.

BS Reporter adds: When contacted, Petroleum Minister Murli Deora, while declining to comment on the high court order, said the government was still studying RIL's gas price submitted to it earlier this month and a decision on the pricing would be reached soon.

Reliance Industries Ltd declined to comment.

RIL had a contract with RNRL in January 2006 to supply 28 million standard cubic metres per day (mscmd) of gas from the KG basin. RIL had tied up with NTPC to supply another 12 mscmd of gas, a matter which is also sub-judice.

RIL was to use 6 mscmd of gas in its refinery at Jamnagar.

In May 2006, RIL submitted the contracted KG basin gas price with RNRL to the ministry of petroleum for approval. This was rejected in June last year on the grounds of lack of an arms-length market price discovery.

In November 2006, RNRL moved the Bombay High Court asking it to direct RIL to honour the the gas supply deal for its use in Reliance Energy's proposed 7,000 Mw power project at Dadri in UttarPradesh.

On May 3 this year, the high court passed an interim order directing RIL not to create third-party interests in the gas contracted with RNRL. However, later in that month, RIL invited bids from five fertiliser and five power companies for the price discovery process for KG basin gas.

Following this, RNRL wrote to the petroleum ministry saying that RIL was violating of the high order by calling for such indicative bids.