Wants country’s most prolific gas fields in Krishna-Godavari basin to produce at optimum level.
The government has asked Reliance Industries Ltd (RIL) to sell natural gas from its eastern offshore Krishna Godavari (KG-D6) fields to steel firms like Essar and Ispat to help the country’s most prolific gas fields produce at an optimum level.
The Ministry of Petroleum and Natural Gas yesterday issued orders directing Reliance to sell 3.75 metric million standard cubic metres per day (mmscmd) of gas to Essar Steel, Ispat Steel and Vikram Ispat, a top official said.
“We had identified sectors that would consume the initial 40 mmscmd output from KG-D6. But some of them, like CNG supply projects in cities are unable to take their entire allocation and that is now being reallocated to steel firms,” he said.
Essar will get 2.86 mmscmd, Ispat 0.53 mmscmd and Vikram Ispat the remaining 0.36 mmscmd.
Reliance is currently restricting output from KG-D6 to just 28 mmscmd as not all of the power and fertiliser customers identified by the government are taking their full quota of allocation.
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The official said after power and fertiliser, 5 mmscmd gas from KG-D6 was allocated for city gas projects but only 1.1 mmscmd can immediately be taken. The rest is now being distributed among steel firms.
The allocation will boost the profitability of steel firms, which had been buying expensive LNG or naphtha to meet feedstock shortage at their plants. The official said the allocation has been made in accordance with the Empowered Group of Ministers’ decision of April 9 to give unutilised KG-D6 gas to steel plants that are currently not being supplied their full share of fuel that is sold at administered prices.
Of the 14.97 mmscmd allocated to the fertiliser sector, only 13 mmscmd is being supplied because some urea-making plants are shut down. Of the 17.99 mmscmd earmarked for power, only 15 mmscmd is being sold, while two big customers, NTPC and Dabhol are yet to begin drawing the fuel.
After gas-based steel plants, allocations would also be made to existing gas-fired power plants and to other power plants, including captive plants, depending upon the availability of the unutilised gas, he said.
Essar Steel’s Hazira plant in Gujarat was allocated 3.11 million cubic metres of gas per day from Oil and Natural Gas Corp (ONGC) fields, sold at regulated rates of around $2 per million British thermal units. But it currently gets only 0.66 mmscmd due to the declining output of regulated gas.
Sources said plants like Hazira would get gas that fertiliser, power, LPG extraction plants or city gas projects, which have been given priority of usage of KG-D6 gas in that order, are unable to use.
About 15 mmscmd has been given to urea-making plants, 18 mmscmd to gas-based power plants, three mmscmd to GAIL’s LPG extraction units and five mmscmd to city gas projects for retailing CNG to automobiles and piped cooking gas to households.
Of the allocation for the power sector, Ratnagiri Gas and Power is unable to immediately take its allocated 2.7 mmscmd due to outages at its Dabhol plant.
Similarly, most of the gas earmarked for city projects would go unutilised, as none of the current operators is connected to pipelines carrying KG-D6 gas, the official said.
Reliance is currently producing gas of about 28 mmscmd from the KG-D6 field that came into operation on April 2. Output is expected to rise to 80 mmscmd by the year end.