Gas Pricing Issue: RIL/Anil Ambani/NTPC

About a year back, many oil multinationals had opposed the the government intervention in gas prices and wanted market forces to determine the rate.

Firms that expressed their reservations included BG Group, BP Global, Hardy Exploration, Chevron and Niko Resources.

However, they appear to have subsequently accepted the price of $4.20 per million British thermal unit for Reliance Industries’ gas from the Krishna-Godavari basin. Many of them later bid for oil and gas blocks and, therefore, did not contest the government decision in court.

Officials of the multinationals today declined to comment as the issue was sub judice.

At the annual general meeting of Reliance Natural Resources today, Anil AmbaniAnil Ambani said “the irony is that even RIL’s (Reliance Industries) own international partner in the KG D-6 basin, Niko Resources, has written to the government that according to the production sharing contract, the petroleum ministry has no power to fix the sale price.”

BG India managing director William Adamson had written to the cabinet secretary that the fixing of gas price by the government “would dampen the pace of exploration and erode the confidence of international companies in the forthcoming bidding rounds”.

Chevron India president John R. Digby had written to the petroleum ministry that “market forces should drive the destination, customer selection and the pricing of gas in India”.

Niko chairman Edward S. Sampson had said, “We consider such influence being made on gas pricing to be non-compliant with the rights provided to the contractor for marketing of gas at ‘arms-length prices to the benefit of parties to the contract (Reliance and government)’ under the production sharing contract.”

BP had said that “countries which set an unrealistic wellhead price for gas suffer from lack of exploration and development since exploration investment tends to flow to higher-priced locations”.

Besides fixing the gas price, the empowered group of ministers had ruled that if the price of crude oil went above $60 per barrel, the price of gas would not go up. However, if it fell below $60, gas prices could be revised.

The ministers also agreed that fertiliser makers would get first priority in the supply of gas, followed by power firms.

Source:www.telegraphindia.com