After much dispute and three revised agreements, a dozen fertiliser companies on Friday finally signed on the dotted line, agreeing to purchase gas from RIL.
After much dispute and three revised agreements, a dozen fertiliser companies on Friday finally signed on the dotted line, agreeing to purchase gas from Reliance Industries’ (RIL) D6 block in the Krishna-Godavari basin.
RIL will sell about 15 million standard cubic metres of gas a day (mmscmd) to the fertiliser companies, P M S Prasad, president and chief executive officer of RIL’s oil & gas business, said in New Delhi after the contracts, which are valid for five years, were signed.
Fertiliser firms will pay RIL a marketing margin of 13.5 cents per million British thermal unit (mmBtu) for the gas, said Satish Chander, director general of the Fertiliser Association of India.
The margin is in addition to the government-approved price of $4.2 per mmBtu for the gas.
RIL stuck to its stance of signing gas marketing fees of 13.5 cents per mmBtu.
In the first agreement, RIL had asked for a gas marketing fees of 12 cents per mmBtu, revised it to 15 cents in the second draft and then, brought it down to 13.5 cents.
Fertiliser makers were unhappy with the high marketing fees and
wanted it rolled back to 12 cents per mmBtu.
Chander said, “We told the government about the gas marketing fee and they recognised it. It comes under the subsidy concession scheme.”
RIL will begin initial output of 10 mmscmd in the first week of April and will raise output to 40 mmscmd by July. Fertiliser plants, the first consumers of Krishna Godavari -D6 gas, will start receiving gas within days of starting production with plants closer to Gadimoga onshore terminal getting supply first.
Gadimoga, the onshore terminal situated 5 km north of Yanam, the landfall point of KG gas in the Union territory of Pondicherry.
The Gadimoga terminal is 30 kms from Kakinada on the Andhra Pradesh coast.
“Some plants closer to Kakinada will get from the day it lands onshore,” he said. “By middle of April all fertiliser plants must get gas,” Prasad said.
RIL expects to step up production from the KG field later this year.
“In April, we’ll produce 10 mmscmd,” Prasad said. “Then we want to ramp up faster because we’ve lost some time. By December, we plan to ramp it to 80 million cubic metres a day,” he said, confirming a March 2 story in DNA Money on a faster ramp-up in output.
The company will require 18-20 mmscmd gas for its captive use to run its petrochemical plants and refineries, Prasad said. The sale of gas will help cut India’s fertiliser subsidy bill by as much as Rs 3,000 crore a year, said Atul Chaturvedi, secretary in the fertiliser ministry.
The fertiliser producers also signed separate gas transportation contracts with Reliance Gas Transportation India Ltd, a company promoted by GAIL (India) and NTPC Ltd.
RIL has constructed a 1,396-km pipeline from Kakinada in Andhra Pradesh to Bharuch in Gujarat for gas supply.
According to the contracts, the delivered price of gas in Andhra Pradesh will be $5.34 per mmBtu, $5.87 per mmBtu in Gujarat and Maharashtra. The price for gas in Gujarat will be $6.21 per mmBtu through the Hazira-Vijaipur-Jagdishpur pipeline of GAIL.
(With agencies)
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