RIL's production of natural gas from the middle of next year and its freedom to market its own gas is not a worry for the GAIL India.
When former starts production, the latter will be able to add 50% to its revenue
NEW DELHI: Reliance Industries Ltd’s (RIL) production of natural gas from the middle of next year and its freedom to market its own gas is not a worry for the country’s biggest gas marketer, GAIL India.
The government-owned gas major sees its business of gas transportation alone increasing by about 50% in the next financial year.
GAIL recorded sales revenue of Rs 16,047 crore during 2006-07, on which it earned marketing or trade margin of Rs 190 crore on account of the gas marketed by the company.
Of the total sales, its transmission or transportation business for gas pushed through its pipeline network was Rs 2,214.44 crore, which contributed Rs 1,511 crore to the net profit.
Some time back, GAIL had even thought it would lose business in future since private players producing gas from blocks acquired through competitive bidding would be free to market their gas and transport it, too.
The situation has dramatically changed now.
“We are currently transporting about 83-84 million standard cubic metre a day (mscmd) through our pipeline, and when RIL starts production, we will supply another 40 mscmd which can add 50% to our revenue,” GAIL chairman UD Choubey told DNA Money.
On the related issue of a floor price of $4.2 per million British thermal unit (mBtu) approved for RIL gas from the Krishna Godavri basin, Choubey said after adding transportation charges of HBJ pipeline and marketing margin, RIL gas at Gujarat was comparable to regassified natural gas from Hazira and Dahej.
His reaction comes close on the heels of the country’s biggest natural gas producer, Oil and Natural Gas Corporation, seeing a silver lining in the biddable component of pricing formula proposed for RIL, but now being applied to all natural gas to be produced from blocks under the new exploration and licensing policy.
On being asked whether there was any paucity of gas for its vast network of pipelines in the future, Choubey said, “We don’t see any threat. Ours is a transmission company. Our share is protected.”
GAIL and RIL had reached an understanding and signed term sheet for collaborating in oil and gas exploration, gas transportation and marketing, including city gas distribution and petrochemicals.
According to the term sheet, GAIL would market and transport 10 mscmd of RIL gas. Besides, it would transport natural gas that RIL would market itself since GAIL would provide the crucial connectivity between the producer, RIL, and consumers, wherever RIL pipeline does not give the last mile connectivity.
Sources said it could also include the controversial quantities that had earlier been contracted for NTPC and Reliance Natural Gas Resources, but are now locked in legal battles.
RIL and GAIL would sign a supplementary agreement to their term sheet in a couple of months, which would spell out the pricing details.
Though Choubey said it was yet to be worked out, broadly it would mean that GAIL would get the marketing margin and transportation charges for RIL gas marketed and transported by it. For quantities transported by GAIL but marketed by RIL, only transportation tariff would go to its kitty.
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