The Ministry of Petroleum and Natural Gas has gone ahead and directed Reliance Industries Ltd (RIL) to make additional allocation of natural gas from its Krishna-Godavari (K-G) basin find to nine power companies from the surplus available because of no or low offtake by fertiliser units.
This is in accordance with an earlier decision by the Empowered Group of Ministers (EGoM) on gas utilisation.
Among the companies to benefit are Anil Ambani’s Reliance Infrastructure, Gautami Power, GVK Industries, Lanco Kondapalli Power, Torrent Power, Gujarat Paguthan Energy, Vemagiri Power and Maharashtra State Power Generation Company.
RIL had, in April, signed gas sales and purchase agreements (GSPAs) with these nine customers in the power sector for approximately 11 million metric standard cubic metres per day (mmscmd) at 11 different power generation facilities.
Today’s order from the ministry is a sequel to the Bombay High Court order of Monday, in which RIL (run by Mukesh Ambani) was told to supply 28 mmscmd from KG to Reliance Natural Resources Ltd (RNRL, run by his estranged brother, Anil Ambani) at a price of $2.34 per mBtu (million British thermal units), which is well below the government-stipulated price. The decision was based on an old agreement between the two firms, which RIL had contested as no longer valid. The government was not a party to that case, but was an interested observer.
RIL is likely to appeal to the Supreme Court, but that apart, RNRL is not in a position to utilise all that extra power at the moment. Nor are many fertiliser units, which have a claim, by government rule. Hence today’s order, wherein the power companies are to get the extra gas, till such time as others with a prior claim, are in a position to use it.
“Not a single (existing) consumer has approached us on the issue. Both the (Ambani) parties have been given options to sort out the matters. Right now, there is no (Anil Ambani-owned) power plant. Till that happens, production and distribution of gas from the K-G basin will continue as now,” Union Petroleum Secretary R S Pandey told Business Standard. The existing consumers, that include fertiliser and power plants, are purchasing gas at $4.2 per mBtu.
Pandey cited the court decision which directed the two companies to enter into an agreement, within one month of the judgement, and “till then, the interim arrangement ordered by the court at conclusion of the arguments will continue to operate”.
He said the government has not decided to join the case and is still studying the judgement. It decided to intervene to make the gas available to the country.
Today’s additional allocation under the fall-back arrangement will ensure that the plant load factor of Andhra Pradesh-based power plants would at least be 70 per cent and non-AP plants be 60 per cent.
“This will help in improving the plant load factor of the power producers in proportion in the interim,” Pandey said. However, as and when the steel companies begin to lift 3.75 mmscmd of gas, or the LPG plants of GAIL and ONGC begin consuming 3 mmscmd, the surplus will get reduced.
According to government’s gas utilisation policy, allocation of gas from RIL’s K-G basin is to be made to gas-based urea plants, gas-based LPG plants, gas-based power plants and city gas projects. RIL began gas production from its K-G basin in April this year and is currently estimated to be producing 26.5 mmscmd. This would be ramped up to 30 mmscmd by June-end and 40 mmscmd by July.
