RIL steps on the gas, in talks to sell KG output

Reliance Industries (RIL) has begun talks with over a dozen power and fertiliser firms to sell gas from its Krishna Godavari (KG) basin after it received the Bombay High Court's approval last week. RIL is expected to finalise the list of buyers in consultation with the government by next week. "We have called for a meeting with RIL to shortlist the buyers for the KG basin gas. Companies with idle power and fertiliser units will be the potential buyers," petroleum secretary RS Pandey told. The ministry is likely to discuss plant-wise requirement with the power ministry, he said. The power firms keen to buy gas from RIL are Ratnagiri Gas and Power (RGPPL), GVK Power and Infrastructure, Gautami Power, Konaseema and Torrent Power while the fertiliser firms are Rashtriya Chemicals and Fertilisers (RCF), Kribhco, Iffco, Nagarjuna Fertilisers, Chambal Fertilisers and Tata Chemicals. Petroleum Minister Murli Deora told ET on Sunday, "Many power and fertiliser firms in Andhra Pradesh, Maharashtra and Gujarat are idle due to shortage of gas. I think the beleaguered Dabhol power project (now RGPPL) and RCF should get the first priority in the fertiliser sector." RIL is expected to begin production of gas from the hydrocarbon-rich KG basin later this month. The production of gas in the basin will be scaled up to 40 mmscmd by end 2009 and to 80 mmscmd by end-2010, doubling India’s gas production. About 70% of the gas will be allocated to the power and fertiliser sectors. On full utilisation, the gas supply is expected to boost power generation by 8,000MW and urea production by 10 million tonne per annum (mtpa). Gail India, the country’s biggest gas marketing company, will buy at least 10 million metric standard cubic meters per day (mmscmd), or 25% of the total 40 mmscmd gas to be produced this year from the KG-D6 block of RIL. Gail has already signed an MoU with RIL for buying the gas and is likely to sign a firm agreement soon. Confirming the pact, Gail chairman U D Chaubey told ET, "We have signed an MoU with RIL for procuring 10 mmscmd of RIL’s gas from the KG basin. This gas will be supplied to power and fertiliser firms according to the government’s gas utilisation policy. Most of the RIL gas will flow through our pipeline. The production is likely to begin this month end." Gail has sent a term-sheet to fertiliser companies with proposals to supply them gas from its available sources, including RIL's KG-D6. However, with the softening of naphtha prices, the Department of Fertilisers is also examining the viability of some of its fertiliser plants using naphtha in lieu of natural gas. Once the availability of gas from the KG basin exceeds 40 mmscmd, the demand from petrochemical, refinery and steel sectors, including the downstream units of RIL, would be taken up. Shares of RIL on the BSE lost 3.6%, or Rs 47.65, to close at Rs 1,277.55 over the previous day close. The stock gained 10.8% in the last one week but lost a marginal 0.49% last month.