The government will allocate natural gas from Reliance Industries' Bay of Bengal KG-D6 fields to companies like Essar Steel if any of the consumers it has currently identified is unable to use the fuel.
An Empowered Group of Ministers (EGoM) on April 9 decided to give any unutilised KG-D6 gas to steel plants who are currently not being supplied their full share of administered price fuel, official sources said.
After gas-based steel plants, allocations would also be made to existing gas-fired power plants and to other power plants including captive power plants depending upon the availability of the unutilised gas.
Essar Steel's Hazira plant in Gujarat was allocated 2.11 million cubic meters per day of gas from Oil and Natural Gas Corp (ONGC) fields that is sold at regulated rates of around $2 per million British thermal unit. But it currently gets only 0.66 mmcmd due to declining output of regulated gas.
Sources said plants like Hazira would get gas that fertiliser, power, LPG extraction plants or city gas projects, who have been given priority of usage of KG-D6 gas in that order, are unable to use.
Of the 40 mmcmd initial output from KG-D6, 15.3 mmcmd has been given to urea-making plants, 18 mmcmd to gas-based power plants, three mmcmd to GAIL's LPG extraction units and five mmcmd to city gas projects for retailing CNG to automobiles and piped cooking gas to households.
Out of the allocation for power sector, Ratnagiri Gas and Power is unable to immediately take its allocated 2.7 mmcmd due to outages at Dabhol plant equipment.
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Similarly, most of the gas earmarked for city gas would go unutilised as none of the current operators are connected to pipelines carrying KG-D6 gas, sources said.
However, some quarters expressed surprise at steel being given priority above power plants. Gas-based power plants currently need about 36 mmcmd of gas but only 18 mmcmd has been given from KG-D6. Any unutilised gas should naturally have gone to meet this unmet demand for electricity generation, they argued.
Also, Reliance, which gave the nation its biggest gas discovery, has not been given even a single cubic meter from its own gas. It buys imported costlier fuel to meet requirement at its twin refineries at Jamnagar in Gujarat and captive power plants.
Reliance is currently producing a little over 15 mmcmd gas from KG-D6 field that came into operation on April 2. Output is expected to rise to 40 mmcmd by June-end and double to 80 mmcmd by the year end.
It has already signed gas sales agreements with 12 fertiliser companies for supply of 15.3 mmcmd gas from KG-D6 at Government approved rate of US $4.20 per mmBtu. Agreements with most of the power plants have also been inked.