No dearth of customers for RIL's KG Basin gas

Over 60 clients demand 134 mcmd, says firm.

More than 60 customers have lined up to secure a share of the gas that Mukesh-Ambani-managed Reliance Industries Ltd (RIL) will start producing from its block in the Krishna-Godavari basin in June 2008, even as a debate on gas pricing rages in the government and the company fights a court case with state-owned NTPC and Anil Ambani-controlled Reliance Natural Resources Ltd (RNRL) to unlock gas supplies from the region.

"We have received unsolicited letters from customers willing to buy gas and the total demand from them is about 134 million cubic metres per day (mcmd), of which around 86 mcmd came up after the market-discovered price became public," said P M S Prasad, president and CEO of RIL's oil and gas division.

The company discovered a market price of $4.33 per million British thermal unit (mbtu) by inviting bids from 10 players "" five power and five fertiliser companies "" in a process that has been questioned since the bidding was open to a limited number of players.

This is the first time an RIL official has come on record to give the company's side of the story.

Commenting on the argument that RIL should offer gas at $2.34 per mbtu, which it offered NTPC in 2003, Prasad said that was based on fuel prices at the time and these had increased significantly in 2007.

Prasad said it was unfair to demand lower prices when litigating parties such as RNRL buy gas from the Raava fields operated by Cairn India at $4.3 per mbtu and NTPC is buying liquefied natural gas from spot markets at $10-13 per mbtu.

According to Bombay High Court's last order, the entire output of 80 mcmd from the KG-Basin is committed to RNRL, NTPC and RIL for captive consumption.

Prasad said bids for about 18 mcmd have been received from the power sector, implying generation of 4,500 MW at a tariff of Rs 2.20-2.50 per unit. RIL gas, he said, would also reduce the urea subsidy by Rs 1,000 crore a year.

According to the terms of its production-sharing contract under the New Exploration and Licensing Policy (NELP), under which the government auctions blocks for exploration and production of oil and gas to private companies, the company is allowed to charge a market-determined rate for gas.

Prasad said RIL might not bid in the next NELP round if the government changes the NELP pricing provisions and dishonours the seven-year-old contract at a crucial stage of gas commercialisation.

Thanks to news of the market for RIL gas and approval for the Navi Mumbai special economic zone announced yesterday, the company's share price touched an all-time high of Rs 1,786.40 on the Bombay Stock Exchange today and closed at Rs 1,768.50, against the previous day's close of Rs 1,718.90, a jump of 2.89 per cent.