The Hindu : Business : Gas cos. seek market price

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Wednesday, Jul 11, 2007
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Business

Gas cos. seek market price

Special Correspondent

Mukesh tells CoS that RIL followed a transparent process
ONGC incurring loss on gas supply at administered prices

NEW DELHI: Even as Reliance Industries Limited (RIL) Chairman Mukesh Ambani met the Cabinet Secretary and senior PMO (Prime Minister’s Office) officials, state-run Oil and Natural Gas Corporation (ONGC) on Tuesday stated that it was making an annual loss of Rs. 700 crore on sale of gas at administered prices.

Newly appointed ONGC Chairman R. S. Sharma met the Committee of Secretaries (CoS), set up to look into the pricing of gas from the RIL’s KG-D6 block off the east coast, and informed the panel that the present price of Rs. 3.20 per cubic metre that the corporation gets for gas produced from its own fields was not sustainable. He further stated that the hike suggested by the Tariff Commission to Rs. 3.60 per cubic metre would only help ONGC break-even, sources said.

For gas from new fields, like the deep sea field of RIL, Mr. Sharma is understood to have sought prices close to the one it was getting for selling gas from the jointly-operated Tapti gas fields at $4.75 per million British thermal unit. He told the panel that ONGC’s $2-3 billion investment to bring to production small and marginal gas fields was on the premise that it would get the market price.

Mr. Ambani told the CoS that his company followed a transparent process to arrive at a price of $4.33 per million British thermal unit for KG-D6 gas. Power generation at this price would be less than Rs. 2.50 a unit and would help save Rs. 6,400 crore in fertilizer subsidy annually.

The CoS, after hearing arguments from the power and fertilizer ministries, had invited producers RIL and ONGC to present their case.

In a related development, Mr. Ambani, who met the Expenditure Secretary, Sanjiv Misra on Monday, met the Principal Secretary of the Prime Minister, T. K. Nair, to explain how his firm arrived at the gas price and how attempts to regulate it despite previously giving explicit freedom, would dampen investments in oil and gas hunt in the country. Later, he met the Cabinet Secretary, K. M. Chandrasekhar, on the same issue. Mr. Ambani also met the Fertilizer Secretary, J. Sreedhara Sarma.

‘Adopt standard norms’

The Anil Ambani group company, Reliance Energy Ltd., has urged Petroleum and Natural Gas Minister Murli Deora not to approve the gas price and the formula proposed by Reliance Industries, alleging that the process followed was non-transparent.In a letter to Mr. Deora, a copy of which was released to the media, REL Director (Business Development), J. P. Chalasani urged the Petroleum Minister to come out with standard bidding guidelines to discover the market price of gas.

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