Reliance to sell CBM for $10 per unit

Reliance Industries Ltd is likely to sell coal-bed methane (CBM) at at least $10 a unit as the oil ministry is of the opinion that the company followed the correct procedure of inviting bids on an arm's length basis but the issue has to be scrutinised by the directorate general of hydrocarbons.

RIL's discovered CBM gas price would be in double-digits after eliminating ineligible bidders such as companies related to Reliance, consumers offering very high price for very small quantities and certain fertiliser firms, which offered negative bids.

RIL would produce 3.5 MMSCM a day of methane gas from its blocks in Madhya Pradesh and the state government, in a communication to the oil ministry had expressed concern over the centre's move to indirectly regulate CBM prices as this could hurt the state's revenue.

"The government of India must seek the opinion of state government prior to fixing the price of CBM and also wish to nominate a member from government of MP in the steering committee," MP state energy & mineral resources minister Rajendra Shukla wrote in a letter to oil minister Jaipal Reddy. The state received 10 per cent royalty and 13 per cent value added tax with the centre getting 12.5 per cent production-linked payment and 2 per cent tax, a state government official said.
Reliance's price discovery mechanism had been earlier rejected by the oil ministry on grounds that it was not transparent. The official said, a preliminary examination had found that Reliance Industries' latest attempts to discover coal bed methane (CBM) gas from its Madhya Pradesh blocks were broadly in order and it had followed an arm's-length bidding process this time unlike the previous exercise of price discovery.

Reliance had first submitted its pricing basis in September last year to the oil ministry, which it had rejected on grounds that the bids had been invited from a limited number of customers. The company had submitted another proposal to the ministry on 21 February following an open bidding process. Under the contract the government was obliged to approve the basis of pricing in 60 days.

Meanwhile, the Petroleum and Natural Gas Ministry is likely to take a decision on the pricing of coal bed methane (CBM) gas, planned for production by Reliance Industries Ltd (RIL) and Essar Oil, by the end of next month.