RIL's gas supply pact with NTPC: EGoM to decide on 14th Feb

The Power Ministry wants the Empowered Group of Ministers headed by Finance Minister Pranab Mukherjee to order Reliance Industries to sign an agreement to supply 2.16 million cubic metres a day of natural gas to NTPC.

The EGoM on natural gas allocation is slated to meet on February 14, its first meeting in over a year.

Sources said RIL has not signed pacts for supply of 2.74 mmcmd out of the 4.46 mmcmd of gas allocated to five power projects by the EGoM.

Of these, state-owned NTPC is the most-affected, with 2.16 mmcmd of gas supply pending.

While the EGoM had allocated 2.3 mmcmd of RIL's eastern offshore KG-D6 gas to NTPC, the Mukesh Ambani-run firm had in September, 2009, signed a Gas Sale Purchase Agreement (GSPA) with NTPC for supply of just 0.61 mmcmd due to capacity constraints in the pipeline carrying the gas.

The pipeline constraints have been totally removed since June, 2010, but RIL has been delaying the signing of a GSPA despite committing to supply 2.16 mmcmd through side letters to the September, 2009, GSPA, they said.

The Power Ministry, which had taken up the issue with the Oil Ministry several times, now wants this to be included in the agenda for the EGoM meeting slated for 14^th February.

NTPC, it says, is compelled to buy expensive imported LNG in the absence of gas from RIL and during the winter months, the state-owned firm bought as much as 3.6 mmcmd of imported LNG at prices of up to USD 20 per million British thermal units.

RIL's KG-D6 gas is priced at USD 4.205 per mmBtu.

Oil Minister S Jaipal Reddy on Wednesday confirmed the 14^th February  meeting of the EGoM, but did not give details of the agenda that would be considered.

RIL has seen output from its KG-D6 field drop from 61.5 mmcmd in March, 2010, to less than 39 mmcmd, because of which it is not willing to commit supplies to new customers, including NTPC.

The Oil Ministry has suggested key changes in the natural gas allocation policy to the EGoM in view of the sharp drop in output from the KG-D6 fields. It wants gas supplies to power producers that do not sell electricity at regulated tariffs to be stopped.

Also, future gas allocations are to be made only to urea fertiliser plants and fuel allocation to phosphates and potassium fertiliser producers should be stopped, sources said.

The ministry has also proposed to revise the priority attached to city gas distribution (CGD) networks and place them after fertiliser and stranded assets of the power sector and before thenew demands of the fertiliser and power sector.

The fall in KG-D6 forced the Oil Ministry to first apply a pro-rata cut in supplies to all consumers in July, 2010, and with a further dip in output, it restricted supplies to only the core fertiliser, LPG and power sectors.