Reliance Industries Limited may not get higher price till it bridges gap

New Delhi:  The oil ministry is looking at a price of $6-6.5 for all domestic natural gas but wants Reliance Industries to sell KG-D6 gas at old rate of $4.2 till it makes up for shortfall in supplies of past four years. 

 

The ministry last week internally discussed tweaking the formula suggested by the C. Rangarajan Committee to bring down the proposed increase from $8.4-8.8 per million British thermal unit to $6-6.5, a rate that will be affordable to most consumers and also incentivise exploration, sources said.

 

The new rate, the ministry believes, would be acceptable to the international investors and would help in monetising discoveries of Gujar-at State Petroleum Corp in Deendayal block in Bay of Bengal as well as those of RIL in Cauvery (CY-D5), KG-D6 (R-Series) and Mahanadi (NEC-25) block, which are not viable at current $4.2 per mmBtu rate. 

 

Sources said a presentation made at the meeting stated that the new price will be applicable in case of RIL’s KG-D6 block only after shortfall in gas production of last four years (about 1.9 trillion cubic feet) is delivered at old price.

 

For subsequent production (about 2.5 Tcf), the new price will apply. Though the stipulation appears to be the same as the one approved by the Cabinet under the previous UPA regime when it gave nod to the Rangarajan formula, but there appears to be a major shift going by the contents of the presentation. 

 

Sources said the previous government had stipulated that the new rate will not apply only to KG-D6 block’s Dhirubhai-1 and 3 gas fields, which have not produced as per targets in last four years.