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Anil questions Mukesh’s gas price formula

RNRL makes presentation to Petroleum Ministry on KG basin gas pricing, reports Gaurav Choudhury.

business Updated: Jun 21, 2007 01:14 IST
Gaurav Choudhury

The ongoing battle between the Ambani brothers has reached the corridors of the petroleum ministry. The Anil Ambani-controlled Reliance Natural Resources Limited (RNRL) on Wednesday made a presentation to the oil ministry questioning the basis of the Mukesh Ambani owned Reliance Industries Limited’s (RIL’s) pricing for the Krishna-Godavari (KG) basin gas discoveries.

On June 16, RIL had suggested a band of $ 4.4 to $4.6 per million British thermal unit (mbtu) for the gas finds.

Petroleum Minister Murli Deora said the government might appoint a committee of secretaries to look into the matter.

"One brother has already given the representations four days back and the other brother will give his presentation today," Petroleum Minister Murli Deora said on the sidelines of the foundation laying ceremony of the Oil Industries Development Board's new building on Wednesday.

"We want a panel of secretaries to look into the matter of KG gas," he added.

Sources say the government has constituted a panel of five secretaries to finalise the price formula for KG gas.
Earlier this month, the government asked companies to adopt a competitive bidding mechanism for selling natural gas output, and said the petroleum ministry would not intervene in the market-determined price process.

The petroleum ministry, which has accepted the recommendations of a committee that framed guidelines for fixing natural gas prices, had said that where a price discovery through competitive bidding was possible, there should be no need to apply any other principle for valuation of gas.

“Once a market-determined price has been discovered between the suppliers and customers through a transparent competitive bidding process, there should be no need for the government to interfere”, it had said.

In cases where market determined prices could not be established, the government would carry out the valuations based on the most recently market-determined price in the region and it should be appropriately indexed to the present.

Deora also said that the Union Cabinet on Thursday will consider the proposal to allow steel tycoon Lakshmi N Mittal to acquire 49 per cent stake in government-owned Hindustan Petroleum Corporation Limited’s (HPCL’s) 9 million tonne refinery at Bhatinda in Punjab.
"It will be decided in the cabinet tomorrow," Deora said.

Foreign Investment Promotion Board (FIPB) has already cleared the proposal to Mittal Investments Sarl, a LN Mittal holding company, to pick up stake in the refinery involving an amount of Rs 3,365 crore. Current government policy restricts foreign direct investment (FDI) in public-sector petroleum refineries to 26 per cent. Deora said the Cabinet would consider the project-specific proposal.
Mittal Investments will acquire 49 per cent stake in the refinery for Rs 3,365 crore.

Deora said that India will hold discussions with officials from Pakistan and Iran later this month on the proposed India-Pakistan-Iran gas pipeline.

"On June 27 there is a bilateral meeting and on 28th and 29th there are trilateral meetings in New Delhi. We have to strike the deal by mid-July," he said.

He also said that India would source 1.25 million tons of liquefied natural gas from Algeria by 2009.