RIL seeks Dabhol LNG facility in lieu of gas sale

Reliance Industries (RIL), which had recently approached the Centre to sell gas to Ratnagiri Gas and Power's (RGPPL) Dabhol power plant, wants the exclusive use of the plant's under-construction LNG facility in return for the gas.

RIL has offered gas at $ 5 per million metric British thermal unit (MMBTU), according to sources in the Union power ministry. This is a couple of dollars less than the current spot price of gas.

Sources pointed out that while the ministry could find the price attractive as gas prices are expected to remain firm over the next couple of years, it is not happy with RIL's pitch for the LNG facility. RIL officials were not available for comment.

Currently, the government is discussing the modalities of hiving off Dabhol's LNG facility to a private investor, with Petronet LNG leading the race for the acquisition.

The empowered group of ministers (EGOM) is in last meeting over-ruled the power ministry's objection to the sale of Dabhol's LNG facility.

While gasfields in India are located on the east coast, the market for natural gas is largely on the west coast. Both Gujarat State Petroleum Corporation and RIL are expected to start producing gas from their KG Basin finds from 2008-09 onwards.

And pipelines are being laid by both companies to reach customers in the west coast. While GSPC has an LNG terminal at Hazira, RIL does not have an LNG terminal.

The race for the western India gas market heated up recently with Shell and GAIL too signing a pact. It allows GAIL to use Shell's LNG terminal at Hazira.