Reliance to make presentation before ministry on K-G gas price formula

New Delhi: Reliance Industries (RIL) is expected to make a presentation before the Ministry of Petroleum and Natural Gas on its pricing formula of gas from its Krishna Godavari Block. Only after the Ministry approves the formula would a clear picture on RIL''s KG gas price emerge, sources said.

In order to reach a market-determined price for the gas, which is to start flowing from June 2008, RIL had called for quotations from the existing customers - power and fertiliser companies in keeping with the petroleum ministry''s thinking that the prices should be arrived at on an arm''s length basis and be market determined because once a price has been discovered between the suppliers and customers through a transparent competitive bidding process, there would be no need for the Government to interfere.

Sources said the formula being proposed by RIL has variables like crude price and exchange rate, with a floor of $25 per barrel and a cap of $65 a barrel for crude price.

In response to RIL''s invitation for quotations, 10 companies from the power and fertiliser sectors had put in bids in the range of about $4.30 to $4.70 per million British thermal unit (mBtu) at Kakinada.

This excludes marketing and transportation charges. According to industry sources, this range, when translated into delivered price, could be between $5.2-5.7 per mBtu, depending on the location as well as mode of transportation.

As per the bids submitted, the estimated volume demand for 2008-09 is a little over 25 mmscmd, which is expected to go up to 35 mmscmd subsequently.