The Oil Ministry has said Reliance Industries is not right in seeking an out-of-turn hike in price of natural gas produced from KG-D6 fields and asserted the USD 4.205 per mmBtu rate will prevail unless pricing formula is changed.
The Ministry has taken exception to RIL’s September 6 letter that stated that GMR Energy and Welspun Maxsteel were willing to pay USD 4.75 to USD 5.25 per million British thermal unit for KG-D6 gas.
The government had in 2007 approved a formula for pricing of natural gas from KG-D6 fields and USD 4.205 per mmBtu was the price derived from that formula and fixed for first five years of production (until March 2014), a senior Ministry official said.
“We did not fix a price. We approved a pricing formula. Now for the company to come to us saying this customer or that customer is willing to a higher price and so that price should apply is wrong. If they want higher price they will have to seek a formal approval for revision in the pricing formula,” he said.
Though RIL in its letter had not made any suggestion for a revision in rates, it referred the proposals received to the ministry for advice and action. The official said, adding that the company could, hypothetically speaking, get a letter from some other customer in dire need of fuel tomorrow to seek an even higher price.
“We are still trying to find out what RIL wanted us to do because the letter does not say anything,” the official said.
Also, the two firms, the official claimed, have since withdrawn their offers.
Though the letter written by RIL Senior Vice-President (Commercial) B. Ganguly did not explicitly seek a revision in prices, it cited provisions in the Production Sharing Contract (PSC) to say that a higher price would be beneficial to both the government and the company.
RIL spokesperson could not be immediately reached for comments.
Also, RIL has been saying that it cannot sustain output beyond the current level of 60 million cubic metres a day and has been resisting signing new contracts at the government- approved price. But it is now seeking to sell gas to GMR/Welspun that is offering to pay a higher rate, the official said.
Furthermore, the company has all along in the legal battle with the Anil Ambani Group - which was seeking gas as per a family agreement at rates lower than the government- approved price -- stated that RIL was a mere contractor and the government alone had the powers to approve a price and fix users of the gas.
The official said if RIL wants a revision in gas price, it should make a formal application citing the circumstances that have necessitated such a move.
