Mukesh Ambani-led Reliance Industries Ltd (RIL) has sought a two-three fold increase in the price of gas being produced from its Krishna-Godavari (KG)-D6 fields, also India’s largest gas producing field, off the eastern coast.
In a recent letter addressed to the empowered group of ministers (EGoM), which will decide on whether or not to raise the price of KG-D6 gas before 2014, RIL has said the price of gas from KG-D6 should be linked to the price of imported LNG secured under long-term contracts.Against the KG-D6 gas price of $4.2 per unit, the landed price of imported LNG secured through long term contracts is around $10-12 per unit.
“While the price of $4.2 per unit certainly needs revision, its linkage to imported LNG is not correct,” said a former petroleum secretary on the condition of anonymity.
“At present, the gas that you are planning to import from Turkmenistan exclusive of transportation and other charges is $7-7.5 a unit at their border. So if a third country can sell you gas at that price, why should our own domestic gas be priced any higher, he added.
RIL has been seeking revision in the price of gas from the KG-D6 field citing contractual requirements. “Given the provisions of the PSC, the contractor is obliged to conduct sales of gas at the best available arms-length prices for similar sales in the region where gas is freely sold,” RIL said in its letter.
Stating that a large number of KG-D6 customers are also buying LNG sourced at the PLL terminal at Dahej under term contracts, where the price of LNG is linked to international crude prices, RIL said that over 35% of India’s gas demand is met by imported LNG.
RIL’s letter on gas price revision has gone to finance minister Pranab Mukherjee, who is also the chairman of the EGoM.