RIL to continue gas sales at current prices from 1 April: report
29 March 2014
Reliance Industries and its partners will have continue gas sales at current prices from RIL's east coast block following a delay in the new pricing regime, Reuters reported citing the Election Commission.
The company's five-year gas sales pacts with sectors including fertiliser and power are set to expire on 31 March, requiring buyers to sign fresh contracts for supplies from the D6 block of the conglomerate in the Krishna Godavari basin, off the east coast of India.
Referring to rules barring policy shift prior to elections the source said, $4.2 (per million British thermal unit) would continue to be in force till the Code of Conduct was lifted after the general elections starting 7 April.
Meanwhile, British energy giant BP and Niko Resources of Canada had served arbitration notices on the government, joining partner Reliance Industries as it take on the government over penalties for KG-D6 gas production falling short of target.
The two companies filed separate arbitration notices earlier this week, a move that would help them benefit from revised natural gas prices in the next financial year, according to sources privy to the development, PTI reported.
The two BP and Niko are facing a situation where the near-doubling of the gas rate to about $8 per million British thermal units from the next financial year would not accrue to them.
The two companies had taken an identical stance to RIL in its 2012 arbitration against the levy of a $1.8-billion penalty for output falling to a 10th of the targeted 80 million standard cubic meters a day.
PTI cited sources as saying, the two firms, like RIL, maintained that the production sharing contract did not provide for a penalty in the form of denying costs incurred if output fell short of projections made in field investment plans.
The cabinet had in December stipulated last year, that the new gas rate would apply to all producers.
However, RIL, the contractor of the eastern offshore KG-D6 block, would be required to furnish bank guarantees equivalent to the incremental revenue that would come to it with the new rate.
If it was proved that the company deliberately produced less gas from the D1 and D3 fields in KG-D6, the bank guarantees would be encashed, depriving RIL of the additional revenue.