Richa Mishra

New Delhi, Sept. 2

The marketing agreement between GAIL (India) Ltd and Reliance Industries Ltd (RIL) to sell D6 gas stands inoperative due to a Government policy that does not allow RIL to sell gas independently. Though GAIL continues to transport a little over 30 mscmd of D6 gas, it is not making revenues from marketing it.

With the Government policy for gas utilisation clearly spelling out the priority sectors and the companies to which RIL can sell the gas, an industry source told Business Line that “this has left no scope for RIL to sell gas to GAIL, unless there is some change in the Government policy.”

Besides, RIL has also informed the Government that it can currently sustain output of about 60 mscmd from D6 fields. Of this, about 14 mscmd is sold to fertiliser plants, 28 mscmd to power plants, and 10 mscmd to petrochemical plants and refineries, and the remaining to others such as sponge iron plants, LPG plants and city gas distribution companies.

Currently, GAIL transports 116 mscmd of gas from various sources. Of this 31-33 mscmd is D6 gas. Leaving aside the D6 gas GAIL markets the remaining gas to various customers. GAIL was looking at marketing 10 mscmd of D6 gas.

GAIL’s revenues from natural gas transmission during the first quarter of the current fiscal was up 22 per cent at Rs 897 crore as against the same period last year. The net sales from natural gas trading during the quarter were up by 17 per cent to Rs 5,452 crore.

The pact

In March 2007, GAIL and RIL had inked a memorandum of understanding (MoU) for cooperation in the gas sector in areas including natural gas pipeline transmission and marketing, CBM gas opportunities, city and local gas distribution, operation and maintenance services, exploration and production, and technology and knowledge-sharing. It is the marketing component of the agreement that has become inoperative.

Under the MoU, the two companies were to work out the modalities for transportation of natural gas from various gas sources of RIL in the Krishna Godavari and Mahanadi basins on the East Coast through pipeline and long-term arrangements with regard to gas supply and distribution.

Also, wherever there is capacity available in the existing pipeline of GAIL, the same shall be available on the principle of common carrier for better utilisation of pipeline capacity.

The MoU also provides for cooperation between GAIL and RIL in the purchase, sale, swap and marketing of gas and import of gas (LNG) through transnational pipelines. Further, the two companies shall share pipeline capacity in Andhra Pradesh, Maharashtra, and Gujarat on mutually agreed terms.

Asked whether other components of the MoU still hold, the source said, “The opportunities are still open.”

The stock fell two per cent on Thursday to close at Rs 459.3. It has been hovering in Rs 475-430 range in the last one month.

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More Stories on : Petroleum | Alliances & Joint Ventures | GAIL (India) Ltd | Reliance Industries Ltd

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