HC interim order lifts stay on RIL 3rd-party gas sale

Written by Corporate Bureau | Mumbai | Updated: Jan 31 2009, 06:46am hrs
Brief
In an interim order, the Bombay High Court on Friday lifted a stay on Mukesh Ambani-led Reliance Industries Ltd (RIL) selling gas from its Krishna-Godavari (KG) basin finds to third-party consumers. The court will deliver its final verdict in mid-March. RIL has been permitted to sell the gas at $4.2 per million British thermal unit (mmBtu) during the interim period.

The court has, however, stipulated that sales would only be to priority customers as determined by the government, with the fertiliser and power sectors topping the list. RIL is fighting two separate cases with Anil Ambani-led Reliance Natural Resources Ltd (RNRL) and National Thermal Power Corporation (NTPC) over the price and quantity of gas to be sold from the KG basin.

RNRL has claimed legal right to a large portion of the KG find at a much lower price under a gas sale agreement signed at the time of the erstwhile Reliance Group demerger.

RNRL counsel Mukul Rohatgi said the courts order was only interim in nature. Obviously, the gas has to be sold to someone. RIL has been allowed to sell gas only until the final order, he said.

In May 2007, the court had restrained RIL from selling gas from its KG D6 block to third-party customers after the RNRL and NTPC cases were filed. Both companies had contended that they should receive the gas at $2.34 per mmBtu under their sale agreements with RIL. In September 2008, the government had made a strong case for the stay on gas sales to be lifted, citing the needs of the power and fertiliser sectors. However, the divisional bench of Justices KK Tated and JN Patel only conferred an interim order.

According to industry observers, RIL should get a revenue boost once natural gas production from the KG basin fields goes fully on stream by late February, pumping 30-40 million metric cubic metres a day (mmcmd). Revenues from the fields will be reflected in the ensuing financial year. RIL recently posted a net profit of Rs 3,501 crore for the third quarter of 2008-09.

Says Deepak Parek from Angel Broking, RIL will be able to pump not more than 15-20 mmcmd in the initial 45 days from the KG fields. However, the timing of the stays lifting is appropriate because RIL was planning to start pumping gas from mid-February.

RIL shares were up 4.5% on the BSE on Friday to close at Rs 1,325.20, while RNRL rose 4.58% to close at Rs 51.35.