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Kakinada-Dadri gas pipeline project delayed

Petroleum ministry asks RFRL to ensure gas-sourcing before giving the go-ahead to build the pipeline, reports Deepak Joshi.

india Updated: Nov 30, 2006 23:54 IST

The proposed 3500 MW gas-based plant of Reliance Fuel Resources Ltd (RFRL) at Dadri in Uttar Pradesh, is likely to be delayed further.

The petroleum ministry has askedRFRLto ensure gas-sourcing before it can be given the go-ahead to build a natural gas pipeline from Kakinada in Andhra Pradesh to Dadri. RFRL is jointly promoted by Reliance Energy Ltd (REL) and Reliance Natural Resources Ltd, both Anil Dhurbhai Ambani Group (ADAG) companies.

The ministry has also asked Reliance Industries Ltd (RIL), the flagship company of Mukesh Ambani to clarify whether it would be supplying gas to RFRL. “It should also be pointed out to RIL that their response regarding supply of gas to RFRL has to be based on a price formula, which is in accordance with the provisions of the production sharing contract (PSC), and which meets with the approval of the government,” says the note prepared by the ministry.

RFRL had mentioned Krishna- Godavari basin gas field of RIL as the source of gas supply and said it had entered into an agreement to purchase 28 million standard cubic metres per day.

Earlier, the ministry had turned down the request by RIL to sell gas to RNRL for
$2.34 (Rs 105) per million British thermal unit (Btu) on the grounds that the price had not been arrived at through competitive bidding. GAIL had signed an agreement with the Panna-Mukta-Tapti joint developers for $4.75 per million Btu.

The government had also referred to the fact that selling gas to RNRL far below the current market price would cost $7 billion loss to the exchequer. As a result, the gas sale and purchase agreement between RIL and RNRL could not be signed.

After rejecting RIL’s request, the government had set up a committee to formulate transparent guidelines for approving gas price formula for government approval under PSC.

First Published: Nov 30, 2006 23:42 IST