A ministerial panel headed by Finance Minister Pranab Mukherjee is likely to meet on July 27 to consider allocating natural gas from Reliance Industries' (RIL) KG-D6 field to the Anil Ambani Group's proposed power plants by making deviations to the present policy.
ADA Group firm Reliance Power (R-Power) has applied to the Oil Ministry for supply of 28 million cubic metres a day of gas for its proposed power plants at Shahapur in Maharashtra and Bharuch in Gujarat, besides the expansion of its Samalkot plant in Andhra Pradesh, sources-in-the-know of the development said.
The plants are a minimum of two years away from commissioning and the Empowered Group of Ministers (EGoM) will have to see if exceptions to the present policy, which bars reservation of gas for future plants, can be made to accommodate the units.
The Gas Utilisation Policy (GUP), formulated by the same EGoM, states that allocation of the scarce fuel can be made only to plants which are ready to receive gas and are connected by pipelines.
"A consumer may wait for gas, but gas cannot wait for a consumer is the essence of the GUP," an official said, confirming the EGoM on July 27.
While Samalkot already gets KG-D6 gas, Shahapur and Bharuch fall on the route of the East-West pipeline that ferries the gas from the eastern offshore fields.
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Sources said the EGoM may decide if gas from KG-D6 can be reserved for R-Power by capping the output at current levels and producing volumes in excess of this level when R-Power plants are built.
Alternately, the government may have to cut supplies to existing customers to accommodate the future plants of R-Power.
Sources said the government can also decide to give some gas to R-Power from the Deendayal fields in the eastern offshore, from which Gujarat State Petroleum Corp (GSPC) will produce a little less than 10 mmcmd from 2012, around the same time the first unit of R-Power is commissioned.
Gas from ONGC's KG-DWN-98/2 block, which sits next to KG-D6, may also be considered, but the production profile of these fields has not yet been approved, they said.
RIL has till date signed long-term supply contracts for up to 57.8 mmcmd of its output. It has told the Oil Ministry that it can sustain output at 60 mmcmd only. Peak output of 80 mmcmd from KG-D6 fields, set to kick-in sometime next year, is to last for 7-8 years.
Sources said R-Power has not sought gas for its 7,800-Mw Dadri plant, which was originally the unit for which ADAG was seeking 28 mmcmd of KG-D6 gas at a price of $2.34 per mBtu, 44 per cent lower than the government-approved price.
The Supreme Court rejected the contention, upholding the government's pricing and utilisation policy.
R-Power made the application for gas after inheriting the Gas Sales Master Agreement that another ADA Group firm, Reliance Natural Resources (RNRL), had signed with RIL. The GSMA outlined RIL's intent of supplying gas to RNRL till 2022. It was passed on to R-Power after RNRL was merged with it.
Gas allocation has been sought not just from KG-D6, from where the majority of the output has already been committed to users, but also from other fields, like those of ONGC and GSPC in the Krishna-Godavari (KG) basin, sources said.
The EGoM, headed by Finance Minister Pranab Mukherjee, had on October 27, 2009, allocated gas to power plants, petrochemical units and refineries that said they would be ready to consume the fuel by February or March.
All the plants that would be commissioned or would begin usage of gas after April, 2010, were to be considered later.
About 12,000 Mw of gas-based power plants are in various stages of implementation and fuel will be allocated to them as and when they are ready.