The Hindu Business Line : Ministry yet to decide on gas sales between Reliance cos

Under evaluation
The Government has received a proposal from RIL seeking its approval on gas price pursuant to the production sharing contracts (PSCs). The proposal is under evaluation with the Government in accordance with the provisions stipulated in the PSC.

New Delhi , May 5

The Ministry of Petroleum and Natural Gas on Friday said that it was yet to take a final view on the agreement on sale of natural gas by Reliance Industries Ltd (RIL) to Anil Ambani Group company Reliance Natural Resources Ltd (RNRL) at $2.34 per million British thermal Unit (mBtu).

In a statement issued here, the Ministry said, ``the evaluation of the said agreement between RIL and RNRL is yet to be completed and no note has been prepared on the issue.''

It termed the reports in media that the Ministry has opposed sale of natural gas by RIL to RNRL at $2.34 per mBtu from the block KG-DWN-98/3 in Krishna Godavari deepwaters as speculative and false.

The Government has received a proposal from RIL seeking its approval on gas price pursuant to the production sharing contracts (PSCs).

The proposal is under evaluation with the Government in accordance with the provisions stipulated in the PSC, the statement added.

Cost involved

It added that the said evaluation was necessitated, as Government is a party in the PSC for RIL's gas fields.

RIL is to supply 28 million standard cubic metres per day of gas from its fields to RNRL for the Dadri power project in Uttar Pradesh for $2.34 mBtu. In addition to this would be $0.12 per mBtu marketing cost and another $0.72 per mBtu cost of transporting it from Kakinada to Dadri.

The delivered price, without taxes, came to $3.18 per mBtu.

The statement also said that the PSC stipulates that the contractor shall endeavour to sell all natural gas produced and saved from the contract area at arms-length prices to the benefits of the parties to the contract.

Further, PSC provides valuation of natural gas on the basis of competitive arms-length sales in the region for similar sales under similar conditions. In Article 21.6.3 of the PSC, the formula or basis has been provided on which the prices shall be determined, shall be approved by the Government prior to the sale of natural gas to the consumers/buyers.