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RIL Cries Foul Over Delay in CBM Pricing

  • Reliance Industries has cried foul against the oil ministry for delay in approving a pricing formula for gas to be tapped from layers of coal at Sohagpur in Madhya Pradesh. The delay has upset its Rs 4,500-crore investment plan to start pumping from 2013-14. Reliance wrote to the ministry last week complaining three months have elapsed since it sought approval for the gas pricing formula, even though the contract with the government stipulates clearance "within 60 business days". The company said it has invested Rs 350 crore in the acreage, called CBM or coal bed methane block. "We sincerely hope that this (delay in approval or new terms) does not materially affect our decision to invest in further development of this block after having established the resource as per the terms of the contract."

  • Reliance claimed that according to the approved plan, supplies from the acreage can sustain generation of 1,000 MW of power or 2 million tonnes of urea in a year. "It will annually substitute liquid fuel to the tune of $1 billion or savings of foreign exchange of $630 million on LNG imports. The last becomes equally important and critical considering the massive downward pressure that has been seen on the rupee over the last few weeks." Sources said the crux of the matter lies in new guidelines issued by the ministry's regulatory arm for explorers, Directorate General of Hydrocarbons. The norms restrict competition for discovering the fuel's market price to a limited number of coal bed gas users. Reliance had last month said these amounted to moving goal posts mid-way and went against the government's own decision. It said new norms would not allow discovery of competitive arms-length pricing.

  • In the latest letter, RIL claimed its pricing formula was reasonable since it reflects the government's formula proposed for importing gas from Turkmenistan. "... the Government of India itself... has been negotiating a near 12% slope to Brent (crude) for prospecting gas flows from Turkmenistan to Pakistan. It will still be higher for India to the extent of additional transit fee payable to Pakistan."

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