Reliance Industries Ltd (RIL) is apparently not happy with the lower price realisation for D6 gas at the Krishna-Godavari (KG) basin and is pushing for revision in line with the price determined by the government for the Gujarat State Petroleum Corporation?s (GSPC) DeenDayal block in the vicinity.
The government has determined gas price for DeenDayal block at $5.7 per million British thermal unit (mBTU) even as RIL is still getting just $4.2 per mBTU price for D6 gas.
The apparent logic behind lower price for RIL gas is the bigger size of production from the D6 that allows the contractor to generate a decent profit even at a lower price.
RIL has been trying to impress upon the petroleum ministry the need for revision of D6 gas price.
The government-determined price for D6 gas is valid for five years. Besides, the power to allocate D6 lies with the government and not the contractor.
In a recent letter to the petroleum ministry, RIL has sought a 25% increase in the existing price of D6 gas, saying customers are ready to a higher price for D6 gas.
The producer has informed the ministry that it has received proposals from GMR Energy and Welspun Maxsteel for purchase of additional KG-D6 gas at prices between $4.75 and $5.25 per mBtu.
Though the letter did not explicitly seek a revision in D6 gas prices, it cited provisions in the production sharing contract (PSC) that RIL has signed with the government to say that a higher price would be beneficial to the government and the company.
The company did not make any suggestion for a revision in rates, but referred the proposals received to the ministry for advice and action.
Significantly, the stand taken by the government in the RIL-RNRL legal dispute over pricing of 28 million standard cubic meter per day (mmcmd) gas from RIL?s D6 block was that the agreement signed between the two companies was not legally valid as the government had the sole authority to decide on pricing and allocation of gas. Later the Supreme Court also upheld the government?s stand.