With gas production from Reliance Industries Ltd’s (RIL’s) prolific D6 field falling, the supply to refinery, petrochemical and steel companies is expected to be cut.
The government has decided to strictly enforce the gas utilisation policy, which gives priority to some industries over others.
A senior government official said RIL had been told to supply gas on priority to fertiliser, power, city gas and LPG companies. “RIL has been issued a letter in this regard,” he said.
Though gas sale and purchase agreements (GSPAs) between companies do not make any distinction between core and non-core customers, the petroleum and natural gas ministry has decided to go ahead and implement the policy.
“This is in response to complaints by fertiliser companies that there has been a supply shortfall,” said the official, who did not want to be named.
The move means that firm allocation of 9.57 million standard cubic metres a day (mscmd) gas will not be available to the non-core consumers in refining, petrochemical and steel sectors if production from the block, off India’s east coast, falls below 48.47 mscmd.
“The firm allocation to fertiliser, power and LPG plants, and the requirement of maintaining the pipeline pressure, take up around 48.47 mscmd,” said an official. The current production from the block in 51 mscmd.
Firm allocation means customers have a right on the quantity mentioned in the GSPA, as against the fall-back arrangement, in which gas is given only if there is a surplus.
The production from the D6 block was 61.5 mscmd in March 2010. From the present production of 51 mscmd, 14 mscmd is given to fertiliser and 24 mscmd to power plants. Others such as sponge iron, LPG, city gas, petrochemical and refinery companies get 13 mscmd.
The empowered group of ministers allotted RIL about 2.5 mscmd for maintaining pressure in its Kakinada-Hyderabad-Uran-Ahmedabad pipeline. RIL’s own refinery and petrochemical plants also use D6 gas.
The supply to Indian Oil and RIL refineries has already been cut and may be halted if production falls further. Indian Oil, which is supposed to get 1.6 mscmd, is being supplied about 0.9 mscmd for its Baroda refinery. Though it is awaiting the signing of the GSPA for the remaining 0.7 mscmd, the agreement is not likely to happen due to the fall in production. Firm allocation of five mscmd and a fallback allocation of up to six mscmd was made for the refinery sector.
Among the three steel producers allotted gas were Essar Steel for its Hazira plant, Ispat Industries for its Dolvi plant and Welspun Vikram Ispat for the Salav plant.
RIL itself was allotted 1.918 mscmd on a firm basis to meet the requirement of 1.168 mscmd at its petrochemical plant in Gandhar, Gujarat, besides 0.75 mscmd for Nagothane, Maharashtra. Around 61.6 mscmd gas was to be allotted on a firm basis and another 30 mscmd on a fall-back basis. But there is a shortfall of more than 10 mscmd from D6.
