RIL denies gas hoarding charges

Written by fe Bureaus | Mumbai | Updated: Aug 31 2009, 08:52am hrs
Mukesh Ambani-controlled Reliance Industries (RIL) has refuted Anil Ambani Groups allegation that it was producing less gas from K-G D6 to create an artificial scarcity which somehow is going to result in windfall profits to RIL.

RIL, in its communication sent on August 28 to the petroleum secretary RS Pandey, said no customer who has been allocated gas by the government has been denied gas for reasons attributable to RIL. Demands of all existing customers from the power and fertiliser sectors in AP have been met. Any shortfall of supplies to the sectors in Gujarat and Maharashtra has not only been met but K-G D6 gas has also replaced nearly the entire volume of RLNG sold on-spot basis to these customers.

RIL argued, Since the government has already approved a price formula for all NELP gas for a period of five years, it is impossible to understand how any contractor can now benefit by not producing gas, especially when there is so much existing demand as to immediately consume all 80 million cubic meters per day (mmscmd) gas at the price approved by the government.

RIL, in fact, has been flooded by requests for supplies which it has been taking up with the government for allocations to these consumers as it continues to ramp up production to the maximum level in accordance with its development plan. Holding back production at this stage, after having made huge investments, would be disastrous not only for the project but for the country as whole. It would be difficult to gauge the sanity of any developer who would deliberately set upon this path.

RIL president & CEO (petroleum) PMS Prasad claimed the most charitable view on this ridiculous allegation is that it only exhibits their utter ignorance of the nature of the gas business and their absolute incomprehension of the economics of complex, large-scale deep water oil & gas projects of which obviously they have no experience.

Prasad explained that the government has only allocated about 40 mmscmd of gas from KG D6 to customers in fertiliser, power, LPG, CGD and steel sector. RIL has signed gas sale purchase agreements (GSPA) with all these customers except NTPC (2.7 mmscmd). After discussions with NTPC over several meetings, we were able to resolve all the issues. NTPC however has still not come forward to sign the agreement, RIl said.

Moreover, supply of gas to RGPPL (Dabhol project) and Essar, who have been allocated 2.7 and 1 mmscmd, respectively, is yet to commence purely on account of constraints from their side. However, supply to RGPPL and Essar is expected to commence shortly.

Thus, RIL said of the allocated quantity of 40 mmscmd, allocation to the extent of 9.4 mmscmd remains un-operational till date. However, against the above 31 mmsmcd allocation which is operational today, RIL, with the consent of the government, is supplying 37 mmscmd gas, which includes supply of gas to customers in the power sector on a fall back basis.

According to RIL, it has received a number of requests from customers for supply of gas from KGD6 at the price approved by the government. We request that the government allocate gas to the existing customers in various sectors so that the production from KGD6 can reach 80 mmscmd in line with the approved development plan, the company added.