Power corners two-thirds of D-6 gas in round II

 THE power sector has been given the lion’s share of gas from the D-6 block of Reliance Industries’ (RIL) Krishna-Godavari basin in the second stage of allocation of the resource as a blazing row involving the feuding Ambani brothers and the government over the sharing and pricing of the gas reaches its climax in the Supreme Court. 



    An Empowered Group of Ministers (EGoM) headed by finance minister Pranab Mukherjee on Tuesday decided that the power sector will get about 13 million standard cubic meters per day (mmscmd) out of the 20 mmscmd that was allocated to various users on a firm basis. “Power sector has been given overriding priority in gas allocation by the EGoM,” petroleum secretary R S Pandey told ET. 



    The ministerial panel, which was reconstituted recently to decide on the utilisation of additional gas produced from the KG basin as RIL steps up output, had its first meeting on Tuesday. It also decided to allocate 30 mmscmd of gas on a fall-back, or temporary basis, depending on the level of production. 



    A previous EGoM, also headed by Pranab Mukherjee, decided which users get to share 40 mmscmd of gas from the first batch of output and set the price at which the gas would be sold at $4.20 per unit. It 15 mmscmd for fertiliser plants, 18 mmscmd for power plants, 3 mmscmd for LPG plants and the rest for city gas distribution projects. The sharing formula for the additional gas comes in the backdrop of a legal dispute in the Supreme Court between Mukesh Ambani-run RIL and RNRL, managed by his younger brother Anil. 



    RNRL is trying to enforce its right to 28 mmscmd of KG gas at $2.34 per unit under the terms of a family settlement. RIL appealed in the Supreme Court after RNRL’s contention was upheld by the Bombay High Court. The government says gas is national property and only it can decide on allocation of the resource. 



    On Tuesday, the reconstituted ministerial panel decided to also give 0.44 mmscmd to steel units. The fertiliser sector has been given firm allocation of 0.178 mmscmd. The EGoM also expanded the list of KG basin gas users, allocating 1.918 mmscmd to the petrochemical sector and about 5 mmscmd for refineries for the first time. All private and public sector refineries would get gas on a pro-rata basis. 



    “With the additional allocation, we will be able to increase and maximise production for the benefit of all stakeholders. The additional allocation will also increase the overall customer base for supply of gas, thereby avoiding frequent changes in the production level from the block” a Reliance Industries representative said. 



    Government estimates that RIL is likely to increase production from its block to 60 mmscmd by December and to 80 mmscmd by the end of current financial year in March 2010. The Directorate General of Hydrocarbons has said that the maximum potential of the block is 90 mmscmd. RIL, on the other hand, has said it is confident of producing only 60 mmscmd on a sustained basis. 



    Based on this information, the government has made a firm allocation of only 20 mmscmd. The EGoM decided that remaining 30 mmscmd, which needs to be validated, will be supplied on a temporary basis to power plants, refineries, city gas distribution projects and captive power projects.