Faced with falling production from KG-D6 fields, the government has asked Reliance Industries to first supply natural gas to priority sectors like fertiliser and power even by stopping flow to refineries and steel plants. The order by the Petroleum Ministry follows sharp dip in production from Reliance’s eastern offshore KG-D6 fields to 47.5 million standard cubic meters per day in the week ended March 26, from 61.5 mmscmd output achieved a year ago.
In case gas production from KG-D6 fields declines further, Reliance has been asked to impose cuts in the following order for priority: CGD (domestic and transport), power, LPG and fertiliser sector. The fall in production of gas from KG-D6 fields has meant rise in government subsidy outgo as the shortfall in cheaper feedstock in fertiliser plants is now being replaced by costlier liquid fuels. Also, less gas to power plants has resulted in lower electricity generation.
Reliance has so far signed up customers for 60.76 mmscmd of gas while production currently is around 48 mmscmd only. The government had accorded highest priority to fertiliser plants followed by LPG extraction units, power plants and city gas distribution projects in allocating KG—D6 gas.Sixteen fertiliser plants have been allocated 15.35 mmscmd of KG—D6 gas on firm or permanent basis while 27 power plants in public and private sector have been allocated 29 mmscmd.A sizeable 7.79 mmscmd of gas has been signed up with steel producers while LPG plants have got 2.59 mmscmd.
RIL is insisting on a more relaxed contract for committing more gas to NTPC. This is despite a government directive asking it to sell 4.46 million standard cubic metres a day (mscmd) gas to the country's biggest power generator. NTPC has so far signed a gas sale and purchase agreement (GSPA) for 2.29 mscmd with RIL. With production from its D6 field off the east coast falling, RIL is using clauses in the contract to avoid committing more gas.
Under the existing GSPA, RIL is to compensate NTPC for any shortfall in the committed supply by paying the price difference between its gas and that bought from other sources. The condition is built in the agreement's 'take or pay' clause. RIL now wants to change this for selling more gas.
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