RIL may have to sell CBM gas at $3.8

RIL may have to sell CBM gas at $3.8

The Mukesh Ambani-led Reliance Industries (RIL) has received a setback with the government clarifying that the prevailing natural gas prices will apply to coal bed methane(CBM) producers as well. This means RIL will have to settle for onethird of the $12 per mmBtu (million British thermal unit) it had sought for gas set to be generated from next month at its Madhya Pradesh CBM blocks. 

Oil minister Dharmendra Pradhan told TOI, “We don’t come out with company-specific policy. It (gas pricing) is a government of India policy and applies to all players, including Reliance, and there is no change.” 

The current natural gas price in India is $5.1 per mmBtu — approved by the NDA government — and is expected to come down to $3.8 per mmBtu when it is revised in September-end. This will be much below the $4.2 per mmBtu that the companies were getting until last year under the UPA regime. 

Declining to comment, an RIL official said the company has not received any official notification from the government.

RIL is on the verge of commencing gas production from its CBM blocks in Madhya Pradesh and Chhattisgarh and is awaiting the completion of its pipeline to transport gas to users. The company is expected to produce 4-5 mmscmd (million metric standard cubic meters per day) of gas from its blocks, taking India’s CBM gas production to 6 mmscmd from 1.1 mmscmd being produced by Essar Oil and Great Eastern Energy Corporation (GEECL). With the revision of gas prices from October 1, RIL may not have to deposit the surplus amount to the gas pool account of the government as the new prices will be lower than $4.2 per mmbtu, a price RIL is authorized to recover from the buyers. 

The company, which is currently producing 11 mmscmd of gas against a target of 80 mmscmd, has maintained that the company will not be able to invest in augmenting production in the future unless it gets marketlinked prices. 

Currently, GEECL’s Raniganj (South) and Raniganj (East) held by Essar Oil are the only two blocks under production. ONGC’s Jharia block started test production but is yet to achieve commercial stage. The petroleum ministry has already received inputs from the industry about non-viability of CBM operations at a lower gas price. In contrast, GEECL sells gas from its CBM block at $1011 mmbtu as the government has approved a minimum floor price for these fields.

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