Note Opposing KGD6 Price Hike by RIL , Withdrawn

The new Oil Ministry headed by M. Veerappa Moily, brings good news for the energy giant, RIL (Reliance Industries Limited), by withdrawing the earlier note put forward by Jaipal Reddy, opposing the rise in gas price by the company. This move was effectuated, following a panel led by the Prime Minister’ s Advisory Council, C Rangarajan that  delved into the issue and supported the same. They were asked to probe into the structure and elements of the guidelines to determine the basis and formula for the price of domestically produced gas and examine the real price fixation.

With the move that increases the price from the present $4.1 million, per British thermal unit to USD 4.2 per million British thermal unit, RIL will be able to increase its revenue by $4.1 billion British thermal unit to import parity rates of USD 14.2-14.51 per mmBtu. This will help the Government earn USD 0.5 billion at current year production accounting to 25 million cubic meters per day. Thus, senior officials claimed that this hike would be advantageous to the government, enabling it to procure higher revenues, and boost power and CNG tariffs.

June and then again on September, Reliance Industries Limited had appealed for an increase in gas price that corroborates with the rate the country is paying for importing LNG since April 1, 2014, as the current five year term for the rate USD 4.2 price expired. Previously, it had contended with the fact that operational costs were increasing at a tremendous rate. It demanded a hike where the KGD6 price is set at 12.67 % of the JCC (Japan Customs – Cleared) Account along with an addition of 0.26 per mmBtu. In 2006, the EGoM (Empowered Group of Ministers) fixed the price to be USD 4.2 per mmBtu price of KG-D6 gas for the initial five years of production. The company forayed into the KGD6 production in April 2009. Based on sources, the six members Rangarajan Committee will evaluate the varied aspects of future Products Sharing Contracts (PSC) and gas structuring. However, Rangarajan will be the sole one to assess CBM pricing.

Senior officials have claimed that they have withdrawn the note to eliminate the issue of duplication or plausible conflicts as a panel has been appointed to examine ways to strengthen the contracts of the country.