Petro ministry to discuss under utilisation of RIL’s KG gas today

Date: 12-06-2009

Barely two months ago, when RIL started production, there were many buyers eager to get the gas first to their starving units. But two months down the line, it’s a different story. Faced with the problem of underutilisation of its gas, RIL is scouting for consumers. The company is producing less than its current capacity. Currently as it can produce 40 mmscmd of gas, but is producing only 26 mmscmd.

The problem started with NTPC, which has still not signed the sales purchase agreement with RIL for buying gas. Of the total 18 mmscmd allocated for power, NTPC’s quota is about 3 mmscmd. However, NTPC is going slow in signing binding contracts because of its unresolved legal dispute with RIL. NTPC is also demanding certain changes in the gas sale and purchase agreement (GSPA) related to marketing margins, which is not possible for RIL,  as RIL has entered into uniform agreements with two dozen buyers in fertiliser and power sectors on terms negotiated by ministries of power, fertiliser and petroleum and it is not possible to change it for NTPC alone.

Another prospective consumer, Ratnagiri Gas Power, better known as Dabhol Power, has finally signed the GSPA, but has not started sourcing the KG basin gas. Its total quota is about 2 mmscmd. The story is no different for fertiliser units, which were the first to get this gas on a priority basis. Fertiliser units were allocated 15 mmscmd units and the gas was expected to revive many of the fuel-starved units, along the HBJ pipeline. But the fertiliser sector is using only 75-80% of that quota due to annual plant shutdown and sudden surge in the APM gas availability, which comes through GAIL. APM gas comes at lower price of $2/ mmbtu against RIL’s rate of $4.20/mmbtu, and fertiliser companies have taken the APM gas first. The quantity that GAIL is pushing through is higher than what the fertiliser sector had taken into account while making projections for RIL gas. It is unfortunate that the gas, which was so eagerly awaited, is now going unutilized. This gross-underutilisation, has resulted in production lagging behind capacity. RIL has approached the petroleum ministry over the gas utilisation issue, and the ministry has called for a meeting with fertiliser and power ministries today to resolve the KG Basin gas issue.crackcrack
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