The Hindu Business Line : Anil Ambani meets Ministry officials over RIL gas deal

The ADA Group Chairman, Mr Anil Ambani, on Thursday met the top brass of the Petroleum Ministry including the Secretary, Mr M.S. Srinivasan, making a case for review of the Government decision to reject Mukesh Ambani-controlled Reliance Industries Ltd's (RIL) proposal to sell gas to his Group company.

According to sources, besides raising the issue of sourcing gas from RIL's K-G basin field, Mr Ambani is also understood to have raised the issue of allotment of coal bed methane (CBM) blocks.

The Petroleum Ministry had recently objected to the pricing formula adopted by RIL for selling gas to Reliance Natural Resources Ltd (RNRL) at $2.34 per million British thermal unit (mBtu). The Ministry had also said that it would lead to significant losses to the Government exchequer.

RNRL on its part has been maintaining that RIL is misleading the Ministry. RNRL says loss to Government, if any, is notional and grossly overstated. Long-term 17-year contract price for NTPC and RNRL cannot be compared to short-term prices from the joint venture fields of Panna, Mukta, and Tapti (PMT). Mr Ambani led RNRL had argued that the PMT price of $4.75 per mBtu is not a comparable benchmark at all. The PMT price is a short-term price for three years while the RNRL deal is for a 17-year contract. Moreover, the terms and conditions of the two contracts are completely different. Besides, short-term prices cannot be used as a benchmark for long-term contracts.

NTPC's contract price for 17 years determined through transparent and arms length international competitive bidding in which RIL also participated, as the successful bidder is the only comparable benchmark available for pricing long term contracts. The Petroleum Ministry has now constituted a Committee to formulate guidelines to be followed for the valuation of gas under the Production Sharing Contracts. It is unfortunate that the RIL-RNRL price has been rejected prematurely without subjecting it to the recommendations of the Committee, the company pointed out. RNRL price as well as all terms and conditions are the same as that of NTPC deal, it maintained.

As regards the bidders in the CBM-III, Mr Ambani group companies RNRL Ltd and Reliance Energy Ltd, along with their consortium partner Geopetro of France, are likely to be allotted four blocks but they contend that they have won two more blocks. The consortium had bid for all ten CBM blocks, bidding for which closed on June 30.

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