New Delhi: State-owned Indian Oil Corp (IOC) and Hindustan Petroleum Corp Ltd (HPCL) have signed contracts with Reliance Industries to buy natural gas to replace costlier liquid fuel at their refineries.
IOC has signed a Gas Sale and Purchase Agreement (GSPA) for buying 0.8 million cubic metres per day of gas from RIL’s eastern offshore KG-D6 fields, while HPCL has inked a pact for 0.2 mmcmd, officials at the state-owned firms said.
KG-D6 gas will replace crude oil or fuel oil that IOC and HPCL use for production of hydrogen at their refineries.
IOC would use the gas at its Koyali refinery in Gujarat, while HPCL would take the fuel at its Mumbai unit, they said, adding that supplies are likely to begin in a week’s time.
Originally, IOC was allocated 1.6 mmcmd of KG-D6 gas for use at its Koyali and Mathura refineries, but the agreement for the Mathura unit could not be signed due to sales tax issues with the Uttar Pradesh government.
An IOC official said the state government is demanding that IOC pay local sales tax instead of Central Sales Tax as paid by other KG-D6 customers.
KG-D6 customers in Andhra Pradesh, Maharashtra and Gujarat pay two per cent CST as the sale is inter-state, but UP is insisting on payment of state sales tax, which is much higher than CST.
Last year, the government had allocated 5.384 mmcmd of gas from KG-D6 to public and private sector refineries, against their demand for 22.8 mmcmd.
IOC had demanded 6.58 mmcmd of gas for its Gujarat, Mathura and Panipat refineries, but as refineries were allocated less than one-fourth of their demand, the state-owned firm is being proportionately given 1.6 mmcmd.
The firm had sought 1.92 mmcmd of KG-D6 gas for its Koyali refinery, near Vadorara, 0.81 mmcmd for its Mathura unit in Uttar Pradesh and 3.85 mmcmd for its Panipat refinery in Haryana.
HPCL had placed a demand for 2.18 mmcmd for its refinery in Mumbai, but was allocated much less.
Besides, Bharat Petroleum Corp Ltd (BPCL) had sought 2.18 mmcmd for use at its Mumbai refinery, RIL wanted 11.23 mmcmd at its twin refineries at Jamnagar in Gujarat, while the neighbouring Vadinar unit of Essar sought 1.57 mmcmd.
All the refineries have been allocated KG-D6 gas proportionately, out of the 5.384-mmcmd firm allocation made by the EGoM in October last year. An additional 6 mmcmd was allocated to them on a fall-back or temporary basis.
While RIL’s twin refineries have been given 4.49 mmcmd each, BPCL has been allotted 0.26 mmcmd, the official said, adding that the two firms are already drawing gas from KG-D6.
Use of gas in oil refining helps companies save on input costs and meet environmental norms.