Reliance Industries has signed agreements with nine fertiliser and power companies for gas sales from its field in the Krishna-Godavari basin over the past three months.
India's largest private sector company has signed memorandums of understanding with Nagarjuna Fertilisers, GVK Industries, Konaseema Power (all in Andhra Pradesh), Kribhco, Chambal Fertilisers, Iffco, Torrent Power (all in Gujarat), Tata Power and Rashtriya Chemicals & Fertilisers in Maharashtra.
The signing of these MoUs is significant because the Mukesh Ambani company is involved in a year-long legal dispute with Reliance Natural Resources, an Anil Dhirubhai Ambani Group company. The dispute is over the supply of gas from the KG basin for RNRL's power projects as part of the Reliance de-merger deal.
On May 7, the Bombay high court maintained the status quo by restraining RIL from selling gas to third parties to protect RNRL's interests. RIL sources said the court has not mentioned anything about informal agreements, which allows them to sign MoUs. The next hearing is on July 22.
These MoUs will be converted into commercial agreements only if the court order is favourable to RIL, sources familiar with the developments said. RIL plans to sell about 30 million standard cubic metre per day (mmscmd) of gas to selected companies when it starts production.
As RIL plans to produce 40 mmscmd at the initial stage, there is room for some more agreements. An additional 10 mmscmd gas will be supplied to the highest bidders after the court order.
About 40 companies including Tata Chemicals, have already approached RIL for gas. The company has received unsolicited offers for demand up to 134 mmscmd from power, fertiliser and chemical companies, the sources said.
The agreements are aimed at avoiding any time-lag in supplying gas if the court verdict is favourable. RIL is busy completing the ground work at the well points for gas evacuation and laying pipelines for distribution. The company is expected to begin gas production from the basin by July-end. RIL officials declined to comment on the issue, saying the matter is sub-judice.
In May 2007, RIL had invited leading power and fertiliser companies to participate in a price discovery programme. Select bidders were asked to indicate their required quantity and a price, including the premium they will pay for the gas.
The companies submitted bids based on which RIL announced the discovered price of $4.33 per million British thermal unit (mmBtu). But the government had fixed the floor price at $4.2 per mmBtu after many rounds of discussions with various ministries.
