Reliance to get higher gas price for KG-D6 gas

Reliance Industries looks set to get higher price for its KG-D6 gas from April 2014 after the Prime Minister's Office has ordered that the firm be allowed to discover the market price as stipulated in the contract.

At a meeting convened by Pulok Chatterji, Principal Secretary to the Prime Minister, on September 24, it was decided that RIL should be allowed to find through bidding if consumers are willing to pay more than the current rate $4.2 per mmBtu when rates are due for a revision in April 2014.

Sources privy to the development said the PMO stated that the process of price discovery may be allowed as per the provisions of the Production Sharing Contract (PSC).

The PSC provides for contractors like RIL discovering through an open and transparent bidding process an arms-length price of gas. The so discovered rate is then put to the government for approval.

The development comes amidst strong resistance from the Oil Ministry for any revision in KG-D6 price before April 2014.

Sources said RIL had in January sought a revision in current rate of $4.2 per million British thermal unit immediately. In June, it had modified this to seek a rate equivalent to the price India pays for import of liquefied natural gas (LNG) from April 1, 2014 when the current price is due to expire.

RIL is seeking to price KG-D6 gas at 12.67 per cent of JCC, or Japan Customs-Cleared crude, plus $0.26 per million British thermal unit. At USD 100 per barrel oil price, gas will cost $12.93 per mmBtu.

The formula proposed by RIL is the same at which Petronet LNG Ltd, the nation's largest liquefied natural gas importer, buys 7.5 million tonnes per annum (30 million standard cubic meters per day) of LNG from RasGas of Qatar.

Sources said RIL may be asked to invite bids from the customers, particularly power and fertiliser, to find if their is enough demand at this price.

If demand equivalent to KG-D6 output or more is generated then this rate could be approved.