Anil Ambanis pipeline project put on hold

New Delhi, Nov 27 | Updated: Nov 28 2006, 07:11am hrs
The petroleum ministry has put on hold the Anil Ambani groups proposed project for laying a natural gas pipeline from the Krishna-Godavari basin of Reliance Industries Ltd (RIL) to its power project in Dadri, Uttar Pradesh. This is because Reliance Natural Resources Ltd (RNRL) is yet to sign a gas sale and purchase agreement (GSPA) with RIL.

The ministry has simultaneously asked RIL to clarify whether it would supply gas to Reliance Fuel Resources Limited (RFRL), a subsidiary of RNRL. In May, RFRL had applied to the ministry for right of use (RoU) to build a natural gas pipeline from Kakinada to Dadri.

An internal note of the ministry dated November 16 stated, The sourcing of gas has to be ensured while granting RoU for any pipeline project. It should be pointed out to RIL that its response regarding supply of gas to RFRL has to be based on a price formula that is in step with the provisions of the production-sharing contract and one that has the approval of the government.

The ministry had earlier rejected the gas pricing formula for sale of gas by RIL to RNRL because it was not derived on the basis of competitive arms-length sale in the region. RIL has, accordingly, been asked to submit a revised formula.

RNRL has already submitted the gas supply master agreement signed with RIL on January 12. But the ministry has held the clearance pending a GSPA between the two. It is only the signing of the GSPA that would ensure a tie-up for gas for the proposed pipeline. The GSPA can be signed only after a gas price formula is submitted by RIL and approved by the government, the note added.