Reliance draws up K-G basin gas supply plans

Reliance Industries, the country's largest private sector company, has finalised plans to supply gas from its discovery in the Krishna Godavari (K-G) basin to fertiliser plants in the western region. The company will need to tie up consumers for gas from the K-G basin before it can lay its proposed pipelines from the area.

Gas production is scheduled to begin from June 2008, and the pipeline will need to be ready before that for supply across the country.

"Understanding has been reached for long-term contracts with fertiliser plants in west India. We are awaiting the regulator who will fix the price of the gas to be sold," a senior Reliance official said.

The official said the company was still in the race for supplying gas to the beleaguered Dabhol power plant in Maharashtra. The government is trying to revive the power plant through National Thermal Power Corporation and GAIL India Ltd, with Petronet LNG nominated to supply gas to the plant.

"Once we secure a gas supply contract for Dabhol, we would be interested in taking over at least a part of the plant. However, the issue has got a lot more politicised now," the Reliance official said.

Reliance has in fact almost completed a market study that will determine the course the planned pipeline from Kakinada to Bharuch will take.

"We are also working closely with fertiliser plants to enable them to use gas to fire their units. Many of the plants, which run on naphtha, do not have the capability to take on gas," the Reliance official said.

Using gas would reduce the operating cost of the fertiliser plants by almost a third of the present costs, as gas is that much cheaper than naphtha. The savings from using gas can be used to set up the necessary infrastructure, the official said.

Sources close to Reliance say that the company has also reached an understanding to supply gas to idle power plants in Andhra Pradesh. Almost half of the total capacity of power plants in Andhra Pradesh are lying idle due to unavailability of gas.

Industry sources say Reliance has been in the process of tying up consumers for the K-G basin gas for quite some time now.

However, final deals can not be signed now as the downstream regulator will oversee the gas supply contracts, which will include the price and volume of gas.