Anil co plans Rs 16,000 cr gas pipeline

Anil Ambani Group firm Reliance Fuel Resources Ltd has sought government's nod to lay a Rs 16,000-crore (Rs 160 billion) pipeline to take natural gas from Reliance Industries-operated field off the Andhra coast to its power plant at Dadri in Uttar Pradesh.

RFRL wrote to petroleum secretary on June 5 for permission to lay a pipeline from Kakinada to Dadri, an industry official said.

The pipeline from Kakinada, the landfall point of the gas from KG-D6 block of RIL in Krishna Godavari basin, will pass through Hyderabad and onwards to Nagpur, Bhopal, Delhi and finally reach Dadri, where an Anil Ambani Group firm is setting up a 5,600-MW power project.

The company spokesperson was not immediately available for comments. Industry official said Anil Ambani Group had last year approached state-owned gas utility GAIL (India) Ltd for transporting gas to its power plant. GAIL had offered to transport gas from KG Basin to Dadri by using a part of the existing Hazira-Vijaipur-Jagdishpur network.

GAIL's proposed pipeline from Kakinada was to connect to HVJ pipeline system at Vijaipur in Madhya Pradesh.

Under the new scheme, the Anil Ambani Group -- which is to get at least 28 million standard cubic meters per day of gas from RIL field for its power plant -- plans to set up city gas distribution network in cities falling on the pipeline route, especially Delhi, to supply gas for domestic and commercial use and to automobiles.

The gas would be used for additional power plants. RFRL would lay the pipeline in two years from the date of receiving permission. 

The official said Anil Ambani Group firm made the application on June 5 seeking permission to lay the pipeline even though the government is yet to approve the price at which RIL had agreed to sell gas to RFRL.

RIL is to supply 28 mmscmd of gas to RFRL for $2.34 per million British thermal unit (mBtu), a price which a section in the establishment has seen as 'too low' leading to loss of revenue to the government. The price is half of current market price. 

Mukesh Ambani-managed Reliance Industries Limited plans to produce 40 million standard cubic meters per day (mmscmd) of gas from Dhirubhai-1 and Dhirubhai-3 discoveries in KG-DWN-98/3 (or KG-D6) block off the Andhra coast from mid-2008.

While RIL had approached the petroleum ministry for a nod for the price, RFRL questioned the ministry's right to approve the price at which a producer (in this case RIL) sells gas to customers (RFRL) saying its nod was needed only for the formula or basis of pricing of gas for computing government's share in the spoils.

The ministry has sought the advice of upstream regulator directorate general of Hydrocarbons, which in a letter dated May 5, 2006 stated that the proposal did not mention 'the methodology followed by RIL to fix the buyer on arms-length basis' and sought clarity on pricing methodology.

Petroleum ministry was examining the price offered by RIL and was yet to take a view, the official said.

Anil Ambani Group had this month applied for a license to set up CGD networks in Delhi and Mumbai.

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