Oil Min no to RIL gas sale to R-ADAG firm

Reliance Anil Dhirubhai Ambani Group's (R-ADAG) plan to buy natural gas from Reliance Industries at less than half the market price is being opposed by the Oil Ministry, which in an internal note feels that such a price may lead to "huge financial loss to the Government in form of lower royalty and lower profit petroleum."

The note prepared for consideration of Murli Deora, Union oil minister, states RIL's sale price of $2.34 per million British thermal unit (mBtu) is significantly lower than the $4.75 per mBtu charged for Panna/Mukta and Tapti field gas, where RIL is the joint operator.

Highly placed sources said RIL has claimed that the $ 2.34 dollar per mBtu sale price of gas produced from its KG basin field to Anil Ambani's Reliance Natural Resources (RNRL) was the same price it had bid successfully for NTPC tender.

However, Directorate General of Hydrocarbons, country's top nodal agency, has in a note said: "the reference gas price quoted by RIL to NTPC, has not yet been finalised between RIL and NTPC and is stated to be sub-judice."

Besides, the proposal of RIL had not been approved by the field Operating Committee and Management Committee, where RIL's minority partner Niko Resources of Canada and DGH are members, the note said quoting from the DGH opinion.

"The agreement between RIL and RNRL (for sale of KG Basin field gas) is a part of their demerger agreement and the Gas Supply Master Agreement (GSMA) was signed between them when RNRL was a subsidiary of RIL. Hence, the GSMA does not appear to meet the PSC criteria of arms-length competitive price discovery for sale of gas," the note said.

The price formula proposed by RIL "will adversely impact the Government share of profit in petroleum and royalty," it said."