New Delhi, June 24 (PTI): The government will lose $10 billion in revenues and Reliance Industries will make no profit if natural gas from its KG basin fields is sold at subsidised rates instead of the market price, a petroleum ministry official said.
The government will get $4.6 billion in royalty, profit share and corporate tax if the gas is priced at the current subsidised rate of $2.50 per million British thermal unit (mbtu). This could go up to $14.5 billion if it is sold at a market-determined price of $4.5 per mbtu.
Reliance, which plans to begin production from its KG-D6 block from July 2008, will get $6.6 billion in revenues at $2.5 per mbtu, almost all of which will go into recovering the $5.2-billion invested to develop the field and the project financing cost, the official said.
At $4.5 per mbtu, Reliance will get $14.9 billion in revenues, he said. The government may accept the price formulation proposed by the company that caps it at $4.58 per mbtu at a rupee-to-dollar rate of 41, he added.
RIL plans to index the gas price to crude oil with a floor of $25 a barrel and a cap of $65 per barrel. At the lower level, the gas price comes to $2.5 per mbtu.
“This price compares very favourably to the current price of gas being sold by private operators such as British Gas ($4.75 per mbtu for Panna/Mukta and Tapti fields) and imported LNG ($4.8 per mbtu),” he said.
The delivered price of Reliance Gas at power and fertiliser plants will be between $5.2-6.2 per mbtu, depending on location and taxes.
The official said the delivered price of gas in Andhra Pradesh would be $5.20 per mbtu, $5.84 per mbtu in Maharasthra and Gujarat and $6.18 per mbtu in northern India.
On the other hand, the Iran gas, through the proposed $7.4-billion Iran-Pakistan-India pipeline, will cost $6.02 per mbtu at India-Pakistan border, while that from Myanmar will cost $5.53.
He said the price compared favourably to alternate fuels such as naphtha ($16.2 per mbtu), fuel oil ($10.5 per mbtu) and industrial LPG ($15.1 per mbtu). Reliance plans to produce 40 million standard cubic meters per day (mmscmd) gas from July 2008 and ramp it up to 80 mmscmd in less than a year.
The gas will be transported through a 1,400-km pipeline from Kakinada in Andhra Pradesh to Ahmedabad in Gujarat.
