The Hindu Business Line : Anil Ambani group pitches for transparent norms for Reliance's K-G gas pricing

What they say
RNRL has emphasised, "any gas pricing formula should only be granted if it is arrived at in compliance with the guidelines."
Any decision on determining the market price of gas would also have a direct impact on pricing for RNRL's option volume quantity.

New Delhi June 18 Wanting its share of the pie from Mukesh Ambani-led Reliance Industries Ltd's Krishna Godavari basin gas, an Anil Ambani group company, Reliance Natural Resources Ltd (RNRL) has approached the Petroleum Ministry pitching for transparent guidelines to conduct competitive bidding process for sale of gas.

In its recent communication to the Ministry, the company has emphasised, " any gas pricing formula should only be granted if it is arrived at in compliance with the guidelines." Expressing concern on the entire price discovery process adopted by RIL, it has said that any decision on determining the market price of gas would also have a direct impact on pricing for RNRL's option volume quantity.

Explaining the option volume quantity, sources said, in terms of business re-organisation agreement of 2005 between the two brothers, RNRL would receive a firm supply of 28 million standard cubic metre per day (mscmd) of gas (base volume) after NTPC has received its share of 12 mscmd of gas from RIL. In case NTPC contract does not materialise, then that entitlement would also go to RNRL.

In addition to the base volume of gas supplied to RNRL, it would also have the first option to receive 40 per cent of the gas from the entire future reserves of RIL including new discoveries of gas from new explorations, and bids as may be submitted from time to time. The demerger scheme also required RIL to enter into suitable arrangement with RNRL in order to give effect to distribution of gas that comprises base volume gas and option volume gas.

However, as per the gas supply master agreement of 2006, the option volume of gas entitlement to RNRL is limited to KG Basin. Under the agreement, RNRL, in addition to the base volume, also has the right to option volume gas out of the quantity of gas available over and above the first 53 mscmd. This option volume available quantity will be sold to RNRL at the market price. "Accordingly, any decision on determination on market price of gas would also have direct impact on pricing for RNRL," sources said adding that "the offering of assessed available gas to third parties without determination of option volume and issuing availability notice to RNRL calling for bids is breach of commitments by RIL."

RNRL has raised the issue with both the Petroleum Ministry as well as RIL. Further, the company has also said that in the absence of any existing guidelines from the Government on competitive bidding for gas sales or purchase unlike in the other sectors, RIL's selective invitation of quotation is not a true reflection of general perception of gas buyers.

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