Dragging the government into its gas dispute with Anil Ambani-owned Reliance Natural Resources Ltd (RNRL), Mukesh Ambani-promoted Reliance Industries Ltd (RIL) has said in a letter to RNRL it would not sign any agreement involving gas supply, price, quantity and tenure without the government’s approval.
The Ministry of Petroleum and Natural Gas has so far maintained that it is studying the Mumbai High Court judgement that directed the two companies to enter into an agreement for the sale of 28 million metric standard cubic metres a day (mmscmd) gas from RIL’s D6 block at $2.34 a million British thermal unit (mBtu) for a period of 17 years. There is already pressure on the ministry from existing fertiliser users, who fear disruption in supply.
With the RIL letter, it now becomes clear that the company is not going to negotiate with RNRL and would move the Supreme Court against the high court order. Sources said the RIL letter cited legal advice that said there was a lack of clarity in the court order on the issue of government approval. RIL was still in the process of legal consultation. However, an RNRL spokesperson denied lack of clarity. “The tenure, quality and price are adequately and clearly covered in the judgement. There is no ambiguity,” he said.
He cited the court order that said: “Though we may like to make it clear that the price specified in the NTPC contract, which also forms the basis of the price at which the gas allocated to Anil Ambani Group has been fixed, that is, at the rate of $ 2.34 mBtu is less than the price fixed by the government for the share of its gas and further that there is no specific provision under the Production Sharing Contract to prevent the contractor from selling the gas at less price than that fixed by the government for the valuation of gas to the extent of its share.”
RNRL last week said it had written to RIL seeking super-imposition of clauses — relating to gas supply, price, quantity and tenure — in the pre-existing Gas Sale Master Agreement (GSMA).
According to RNRL, GSMA is a commercially non-bankable agreement, which has prevented RNRL from raising funds and bringing its power plant on course.
More From This Section
RNRL had in its letter also sought clarity on the allotment of 12 mmscmd of gas if RIL’s agreement with power major NTPC fell through. According to GSMA, RNRL would also be allotted another 12 million cubic metres of gas if an earlier agreement between RIL and NTPC failed. NTPC is fighting a case against RIL for buying gas for two of its plants — Kawas and Gandahar in Gujarat at a price of $2.34 per mBtu.
RIL had said it would incur loss if it had to sell natural gas from its D6 block in the Krishna-Godavari basin at $2.34 an mBtu. The company had claimed its total cost of production from the field was $2.9, including $0.89 as post-well head expenditure.