RIL had earlier communicated to the petroleum ministry and the OMCs that it would cut LPG supplies by up to 1 mt from March 2009, saying it wants to produce alkylate instead for export to the US and Europe. Alkylate is a gasoline-blending component that improves fuel quality and cuts emissions of carcinogenic hydrocarbons.
In the absence of regular LPG supplies from RIL, the OMCs had projected a substantial increase in the countrys imports in 2009-10. Against the present requirement of 2.8 mt, LPG imports next year were projected at 5 mt.
Higher LPG imports would have also meant a higher subsidy burden for the OMCs because of the huge difference between the domestic price of LPG and that of imports. Indias demand for LPG is growing at 6-7% a year. Petroleum ministry officials disclosed that a meeting was held recently and discussions were held with RIL to maintain LPG production at its existing 34 mt per annum export-oriented refinery from 2009 onwards at the current levels.
Giving details of the conditions imposed by RIL to consider maintaining production at the refinery, sources said the company asked OMCs to avoid coastal movement ex-Jamnagar in view of the high jetty congestion following the commissioning of its new 29 mtpa refinery at the SEZ.
In case coastal movements are unavoidable, RIL has sought an assurance that there would be no under-recovery to RIL; in other words, OMCs would uplift supplies at Jamnagar refinery transfer price. RIL has also informed the petroleum ministry that during the initial stages of commissioning its SEZ refinery at Jamnagar, some LPG would be produced for which it would seek export permission. However, should exports not be permitted, this LPG would also be offered to the OMCs.
In view of RILs offer to maintain LPG supplies at the current level, the import requirement of OMCs would significantly come down. IOC has been asked to rework the LPG import requirements after taking into account the enhanced supplies from RIL, said a ministry official.
Considering the huge under-recoveries of OMCs in moving LPG by road from the Kandla and Hazira ports to the north, the petroleum ministry has also asked GAIL to provide a hook-up to RILs new SEZ refinery to pump LPG into its pipeline.