A higher gas price rise for Reliance Industries Ltd (RIL) from April 1 would not be easy, with the government deciding to monitor production from its D1 and D3 gas fields in the Krishna-Godavari basin. A three-member committee would be monitoring the amount of production shortfall and based on it, decide the amount of bank guarantee to be given by the company.
According to an official, the committee would include the director- general of hydrocarbons, an additional secretary and one joint secretary of the petroleum ministry. "A notification in this regard would be out by the first week of January, as the Cabinet Committee on Economic Affairs (CCEA) has already cleared the formation of the panel. There would be a separate agreement with RIL within 15 days after the notification," said a senior ministry official.
With current production, the bank guarantee is likely to be $134 million a quarter. It would also depend on the amount of shortfall and the price emerging from the Rangarajan formula. If the remaining recoverable gas reserves of about 0.75 trillion cubic feet from D1 and D3 are taken into account, it comes to $3 billion.
The petroleum ministry is already in talks with the law ministry to work on the modality, said the official. "The mandate of the committee would be to decide on the right amount for bank guarantee, taking into account of the gas produced and the revenue. Moreover, the guidelines would ensure the quantum of bank guarantee, based on the production that time, is known at least two weeks prior to the expiry of the earlier guarantee."
The guarantee would be encashed if the company was found to have hoarded gas. It would be equivalent to the incremental revenue that RIL would get from the new price.
RIL's KG-D6 output is currently 10 million standard cubic metres a day (mscmd) and had seen a shortfall of 154 mscmd in the past four years. Though initial estimates from the two discoveries were 10.3 tcf, RIL had brought the estimates down to 2.9 tcf last year.