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Mukesh sells natural gas to Anil

Mukesh Ambani?s Reliance Industries will sell natural gas to brother Anil?s power utilities at the price of $3.18 per million British thermal unit (mbtu) up to 2025.

india Updated: Feb 04, 2006 01:31 IST
Suman Layak
Suman Layak

Mukesh Ambani’s Reliance Industries will sell natural gas to brother Anil’s power utilities at the price of $3.18 per million British thermal unit (mbtu) up to 2025. The quantity of gas committed is 28 million standard cubic metres per day (mmscmd).

Reliance Industries Ltd and Reliance Natural Resources Ltd (RNRL) — the gas supply company that emerged through the demerger process) — have entered into a gas supply master agreement on January 12, 2006 at the above terms. RNRL will be headed by Anil Ambani.

This master agreement is valid till 2015 when individual power utilities from the Anil Ambani camp will have to enter into separate gas sale purchase agreements with RIL that can run up to 2025 or for a period of 17 years.

The current international gas prices in USA are ruling around $8 per mbtu. The price charged by Gail (India) in the domestic market is also around $4-$4.50 per mbtu. The gas that India might buy from Iran is also being offered at $2.57 FOB, which would have a landed price in India of around $3.50 per mbtu.

The gas price in the agreement has been linked to the US consumer price index and will be revised accordingly.

The agreement says that the gas to be supplied to RNRL would not hamper RIL’s supply of gas to NTPC. RIL had bid for supplying 12 mmscmd of gas to NTPC at $2.97 per mbtu.

RNRL has submitted the details of the agreement with the stock exchanges. Analysts said that the company was also looking at a listing in the near future, and this agreement could augur well for the listing.

The price charged by RIL can be broken up as follows: The commodity price is at $2.34 per mbtu, marketing and risk management charge of $0.12 per mbtu and transportation price of $0.72 per mbtu.

If RIL’s production of gas exceeds 53 mmscmd, RNRL will have the first right to buy the next 16.6 mmscmd and thereafter 40 per cent of any more gas available.

Incidentally, the agreement between power utilities of Anil Ambani and RIL will be on a take-or-pay basis, while the agreement with NTPC is on a supply or pay basis, where RIL will have to pay for difference of cost if it fails to supply gas.

First Published: Feb 04, 2006 01:31 IST