Ril Set To Get A Higher Price For Kgd6 Gas

The Prime Minister announced that RIL (Reliance Industries Limited) could set its own market price for its KGD6 gas, as per the contract

. Hence, the conglomerate is free to increase the price from April 2014. PulokChatterjee, Principal Secretary to the Prime Minister mentioned that through bidding, the company can comprehend if consumers are ready to pay more than the present price- $4.2 per mmBtu, when it is time for revision in April 2014.

According to sources close to the development, the PMO mentioned that this price determining procedure would be putto fruition based on the Production Sharing Contract (PSC). For contractors like RIL, the PSC entails an open and transparent system of bidding with an arms length price, whichis then put forward to the Government in the process of approval. A few sources claim that there was an immediate alteration in the price of $ 4.2 per million British units byMukeshAmbani led RIL in January. It later changed this price in June to perch on a rate equivalent to the one that the country spends on import of Liquefied Natural Gas (LNG) from April 1, 2014.

RIL, the oil and energy giant expects to set the priceat 12.67 percent of JCC, Japan Customs Cleared Crude along with an additional $0.26 per million British thermal unit. With this, gas will cost $12.93 per mmBtu at$ 100 per barrel oil price. With this pricing strategy applied, RILs price will be equal to that of Petronet LNG Ltd whichthe countrys largest liquefied natural gas importer isbuying LNGaccounting to 7.5 million tonnes per annum from RasGas of Qatar.

Sources mention that RIL will first ascertain if the demand remains the same for the increased price. For the same, they will call for bids from the customers, especially power and fertilizer. The new rates will come to the fore if the hike in price does not negatively affect the demand.

The Empowered Group of Ministers (EGoM)received a note circular that mentioned that the hike in the rate to USD 14.2-14.51 per mmBtu from the present USD 4.2 per million British thermal unit would enable the company to generate increased revenue of USD 4.1 billion. The Production Sharing Contract (PSC) did not specify any fixed period for the approved prices to be valid.

by: Chintan Shah

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