RIL’s gas pricing review request could hit roadblocks

14 Apr 2012

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Reliance Industries' request for a premature review of pricing of natural gas from its KG-D6 block could face opposition with key ministries  including the law ministry, as a similar demand by Oman was rejected for the gas it supplied to joint venture Oman India Fertiliser Company (Omifco).

All ministries, except external affairs, had opposed Muscat's decision to quadruple the price of gas and had taken government-run Oman Oil Company (OOC) to arbitration over the sultanate's decision to revise gas price before July 2015.

The Gas Supply Agreement (GSA) between OOC and Omifco in May 2002 fixed gas feedstock price at 77 cents per mBtu for 10 years from start of commercial production (July 2005) with annual 4.5 per cent raise from the 11th year with further escalation linked to global urea price from the 16th year.

However, last August, Oman's minister of oil & gas Mohammed Hamad Al Rumhy sought India's consent for charging Omifco $3 per mBtu starting 1 January, 2012 in an effort to secure ''a fair price'' for the gas.

An  Indian inter-ministerial committee, set up to resolve the issue, unanimously pronounced that the revision was in violation of the GSA and needed to be rolled back. It said last January that in case such a rollback was not agreed to, since the GSA was between Oman and Omifco, the burden arising from such revision should be borne by Omifco.

Other ministers had raised the pitch for a legal recourse since then.

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