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HindustanTimes Tue,29 Jul 2014

Mukesh Ambani's $10-bn gas plans on hold?

Anupama Airy , Hindustan Times  New Delhi, September 24, 2013
First Published: 01:08 IST(24/9/2013) | Last Updated: 11:45 IST(24/9/2013)

Reliance Industries Ltd (RIL) is fighting fire with fire. In a bid to counter pressure being brought to bear on it by the government to sell gas from its existing fields at less than the market price, it is contemplating putting $10 billion (Rs 63,000 crore)  of additional investments in its KG-D6 block on hold.

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Reliance had not been able to supply the contracted amount of gas due to a shortfall in production at its KG-D6 fields. The government wants it to supply this shortfall amount at the old price of $4.2 per unit.

Sources close to the developments said RIL’s board may decide to freeze investments to arrest the decline in output at its fields in the event of the petroleum ministry forcing it to sell gas from its existing fields at $4.2 per unit. RIL’s spokesperson refused an official comment on the development. http://www.hindustantimes.com/Images/Popup/2013/9/24_09_pg15a.jpg

It may be noted here that the government had, in late June, approved pricing of all domestically produced natural gas at an average of international hub rates and actual cost of LNG, which will work out to around $6.7 per unit at prevailing international prices and at around $8.4 per unit, or double the existing price of gas at $4.2 per unit, next year.

RIL’s executive director, PMS Prasad had told HT in a recent interaction that it was unforeseen geological complexities that led to the sudden fall in output.

Prasad has even termed the government move as the one that will stifle private investment in oil and gas hunt as also one that runs contrary to the contract it had signed.

On September 3, RIL  had written to petroleum minister M Veerappa Moily saying the production sharing contract (PSC) does not bind it to indicative production numbers.

“Neither the PSC nor the field development plan (or investment proposal) even suggest that a shortfall in production can be considered a breach for which penalties can be levied,” Prasad wrote.

RIL, he said, has on numerous occasions asked the government to appoint an independent third party technical expert to verify performance of the fields and see if the company had been hoarding gas to benefit from higher prices.


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