The Hindu Business Line : RIL gets formal nod for KG gas pricing formula

New Delhi, Oct. 11 The Government on Thursday issued a formal approval letter to Reliance Industries Ltd (RIL) on the pricing formula for the gas to be produced by the company from its Eastern offshore fields.

The Government’s move puts to rest all speculations on what was delaying the consent even after an Empowered Group of Ministers (EGoM) had given its go-ahead almost a month ago.

Sources told Business Line that a letter approving a price formula, which priced the gas from RIL’s D6 block in Krishna Godavari Basin at $4.2 per million British thermal unit (mBtu) at delivery point (Kakinada) for the first five years of production, was issued by the Petroleum Ministry on Thursday.

Benchmark

Indications are that the formal letter, however, does not stipulate on how much quantum RIL has to sell, to which consumer. The gas price formula for RIL’s D6 block gathers significance in the background that it sets a benchmark for future pricing from the region.

The EGoM headed by the Minister for External Affairs, Mr Pranab Mukherjee, had on September 12 approved with minor changes a price formula proposed by RIL. As per RIL’s original proposal, the price at delivery point was $4.33 per mBtu.

RIL has been given the approval for five years from July 2008, the period from which it starts producing from the fields, after which it would be reviewed again. This approval is, however, without prejudice to the NTPC versus RIL and Anil Ambani-led RNRL versus RIL court cases.

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