While an earlier agreement with gas marketer GAIL has remained a non-starter, Reliance Industries Ltd (RIL) today announced formation of a gas marketing venture with BP as part of a multi-billion dollar deal.
This joint venture is expected to primarily focus on marketing of imported liquefied natural gas (LNG), since customers of RIL’s domestic gas are decided by the government.
RIL and BP plan to form a 50:50 JV company for sourcing and marketing of gas. “The joint venture will also endeavour to accelerate the creation of infrastructure for receiving, transporting and marketing of natural gas in India,” said a company statement.
The deal will integrate BP’s global resources with India and look at supplying gas to the Indian market, depending upon the available infrastructure, RIL chairman and managing director Mukesh Ambani told reporters in London. He added the plan would be in line with government policies, which means the JV cannot choose its customers for domestic gas.
The government policy on New Exploration Licensing Policy (Nelp) blocks gives the contractor freedom of marketing. However, this freedom is limited, since the government decides the price and customers. The gas has to be sold domestically on Nelp conditions. “It can be exported only if there is a lack of demand in the domestic market,” said an industry expert.
Even before RIL’s prolific D6 block in the Krishna-Godavari basin started commercial production in 2009, GAIL, the biggest marketer of gas in the country and RIL signed a memorandum of understanding in 2007 but it did not materialise. GAIL was to have marketed and transported a portion of RIL gas, besides transporting natural gas that RIL would market itself. Gas produced by RIL is sold to government-identified customers at a government-determined price, though RIL earns a marketing margin on the sales.
RIL uses the GAIL pipeline network for last-mile connectivity and links to areas where it does not have reach. The deal not valid any more, after the Supreme Court ruled in the RIL-Reliance Natural Resources Ltd case last year that the government is the owner of natural gas and all rights rests with it.