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RIL stands pat on gas price

New Delhi, May 14: Reliance Industries has categorically told buyers of its KG-D6 gas that the new rates, as and when approved, will apply from April 1.

“The gas price payable for the supplies received by you from April 1, 2014, onwards shall be the price as may be made applicable from such date by virtue of a notification by the government or the outcome of the arbitration,” RIL wrote in a letter to urea manufacturing plants.

The RIL missive is significant as uncertainty prevails over the revised rate and whether its implementation will be retrospective or from the date of notification.

The exploration company said it would charge the difference between the current rate of $4.20 per million British thermal unit (mBtu) and the new rate when it was approved by the government.

Indications are that natural gas prices will almost double to around $8.34 per mBtu based on the Rangarajan formula.

“You (fertiliser firms) have the option of not accepting the gas, but please note that by continuing to accept the gas being supplied to you, you will be deemed to have accepted the above conditions,” the letter added.

RIL and its partners BP Plc of UK and Canada’s Niko Resources had last week slapped an arbitration notice on the government over the delay in the implementation of the new rates.

The Election Commission had asked the government to defer the announcement of the new price till the completion of the polls, and RIL was asked to continue selling the gas at old rates.

“The delay in notifying the higher prices of gas has resulted in a loss of Rs 300 crore per month. Most capriciously, there is no clarity on what the gas price will be in the future, failing which all our current and future investment plans are in jeopardy,” RIL said in a note attached to the arbitration notice.

Following a tripartite discussion between Reliance, the fertiliser firms and the petroleum ministry, the explorer had agreed to continue supplying gas to the user industry even after the expiry of the oil contract. However, there was no agreement on the price.

Reliance wanted security of payment for the price difference as the gas price formula had been notified and the only thing left to be announced was the exact price.

The Fertiliser Association of India had made it clear that it would not sign the dotted lines unless the government came out with a new price. The 16 fertiliser firms, which buy around 13 million standard cubic meters a day of KG-D6 gas, had in 2009 provided financial securities to guarantee payment at $4.20 per mBtu.

The government had in 2007 fixed a price of $4.20 per mBtu for gas from the KG-D6 block for the first five years of production. Dhirubhai-1 and 3 and MA fields in the KG-D6 began production in April 2009 and the approved rate expired on March 31, 2014.

 
 
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