Reliance Industries has refused to follow the oil ministry order to swap its Krishna Godavari (KG)-D6 block gas with an Andhra city gas company, saying “trading” in scarce natural resource was not permissible under the gas utilisation policy.
The ministry had ordered that a part of the 2.6 million standard cubic metres per day of KG-D6 gas allocated to state-owned Gail India be diverted to Hyderabad-based Bhagaynagar Gas Ltd (BGL) under a so-called gas swapping guidelines.
GAIL was to make good the shortfall through imports of liquefied natural gas (LNG), which costs four-times the KG-D6 gas price of $4.2 per million British thermal unit. GAIL was to charge BGL the actual price of imported LNG.
RIL in a letter to the ministry said if such an “untenable” policy was allowed, it would encourage KG-D6 allottees to sell the cheap gas at higher rates during times like plant shutdowns when they don’t need the fuel.
“KG-D6 gas has been allocated by government under gas use policy approved by empowered group of ministers specifying, sector priority, plant location and use, whereas to implement the said guidelines, RIL is expected to accept change in sector, location and use from currently allocated end use of KG-D6 gas, and not at the instance of the government but at the behest of the customer, apparently without any reference to or intervention of the government,” RIL wrote.
The ministry had on September 21 written to RIL saying a gas swap “parties do not have to approach government for approval.” “The swapping guidelines are untenable and cannot be reconciled with existing gas use policy,” RIL wrote.
