Fertliser sector seeks not more than $5 mBtu for gas price

New Delhi, July 6 (UNI) The Fertliser Ministry in a presentation to the Commitee of Secretaries (COS) formed to resolve the vexed gas pricing issue today sought gas supplies from Reliance Industries's KG-D6 block at not more than five dollars per million British thermal unit (mBtu).

According to Reliance's proposed pricing formula through which gas would be delivered in Andhra Pradesh, Maharashtra and Gujarat it will be priced between 5.2 to 6.2 dollars per mBtu.

The oil ministry meanwhile said a low gas price of 2.5 dollars would reduce the Government's share in gas production from KG-D6 to 1.2 billion dollars and royalty to 1.6 billion dollars.

Meanwhile, the Power Ministry has said electricity would cost Rs 5.10 per unit at RIL price which was countered by the Oil Ministry.

The CoS, comprising secretaries of petroleum, power, fertilizer, expenditure and law, was to meet on July 5 for deliberating on RIL's KG-D6 block but the meeting has been rescheduled to July 6, officials said.

Oil Ministry at a CoS meeting on July 2 pleaded for not changing the current policy that allows firms discovering hydrocarbons to sell at market prices. The ministry has argued that attempts to regulate prices could be seen as government going back on its commitment and would dampen the forthcoming auction of oil and gas blocks (NELP-VII).

The CoS was constituted after the power and fertiliser ministries cried foul over Reliance Industries determining a sale price of 4.33 dollars per mBtu for the fuel it plans to produce from its KG-D6 block.

Though this price was lower than the average price of 4.57 dollars per mBtu being charged for 20.4 million standard cubic meters per day of gas sold by other privately operated fields, the two ministries demanded regulated pricing.

The Government said it has no role in fixing the prices of natural gas produced from areas auctioned under NELP and only approves the pricing formula.

On May 23, the Prime Minister's Office (PMO) had conveyed that the fertiliser sector should get priority in natural gas allocation and power sector should be encouraged to rely more on coal for new capacities.

Accordingly, Petroleum Ministry said the domestic gas production will increase from 80.54 million standard cubic metres per day in 2007-08 to 119.98 mmscmd in 2008-09.

As Reliance Industries, GSPC and ONGC begin production from KG fields, an additional supplies of 74 mmscmd will be added in 2009-10, 84 mmscmd in 2010-11 and 94 mmscmd in 2011-12.

In its attempt to attract investors the government has promised to sell gas/oil at market-determined price.

It has signed 162 production-sharing contracts for oil/gas acreages and 26 deals for coalbed methane prospects on this tune.

These have the safeguard of the government approving the pricing formula to ensure that companies stay at an arm's length from the process and it is transparent.

UNI