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Reliance resolves issues, to sign pact with fertiliser units

Reliance resolves issues, to sign pact with fertiliser units
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First Published: Tue, Mar 10 2009. 02 09 PM IST
Updated: Tue, Mar 10 2009. 02 09 PM IST
New Delhi: Reliance Industries has resolved almost all issues with fertiliser firms, who are first in line to receive natural gas supplies from the Mukesh Ambani-run company’s prolific KG-D6 fields, and is likely to sign gas supply agreements this month.
Reliance has offered liberal take-or-pay terms in the revised gas sales and purchase agreement that is being sent to nine fertiliser units this week for possible signing along with gas transportation agreement this month.
Sources said fertiliser units will necessarily have to pay for 90% of the volumes allocated to them in a year even though they may not draw even a single cubic meter. But they will have the liberty to take the quantities not drawn, in the next year.
Reliance would extend the five-year supply contract by three months to enable companies to draw the volumes they may not have taken previously. The company will refund money for volumes remaining even after this three-month period.
Sources said the company, which is likely to begin gas supplies from KG-D6 next month, would not sign supply-or-pay agreement (Reliance having to pay if it defaults on supplies) as it has no marketing freedom to sell the fuel.
The refund clause in the take-or-pay agreement would be the first of its kind in the world as globally gas supplies give only a grace period for drawal of fuel not taken previously, they said.
Fertiliser companies will pay Reliance the rupee equivalent of $4.20 per million British thermal unit price of the natural gas from the Krishna-Godavari basin fields.
In the draft gas supply agreement circulated last month, the Fertilizer Association of India had raised the issue of only two fields — Dhirubhai 1 and 3 — in KG-D6 block being earmarked for supplies to the urea making units.
Reliance has responded to this, saying it cannot commit supplies from the entire block as only two fields have till now been approved by the government for development. Moreover, the gas supply agreement is only for five year and not a long-term contract.
The company will begin producing 5-10 million standard cubic meters per day of gas by next month. The output is slated to rise to 40 mmscmd by July.
Tata Chemicals, Indo Gulf and Iffco will be among the first consumers of natural gas from KG-D6.
Eight fertiliser plants on the Hazira-Vijaipur-Jagdishpur — the state-owned Gail India-run pipeline that transports fuel from Gujarat coast to North — circuit would get 7.026 mmscmd of Reliance gas, while 6.689 mmscmd would go to Kribco and GSFC’s units in Gujarat, Rashtriya Chemical’s Maharashtra plants and Nagarjuna Fertiliser in Andhra Pradesh.
KG-D6 gas will land at Kakinada in Andhra Pradesh, from where it will be transported to Baruch in Gujarat through a 1,386 km pipeline laid by Reliance. In Gujarat, Reliance will use the pipeline network of Gujarat State Petronet Ltd to take the gas to end-consumers as well as connect to HVJ pipeline.
Sources said on HVJ, National Fertilisers will get 0.65 mmscmd, Chambal Fertiliser 1.15 mmscmd, and Indian Farmers Fertiliser Coop’s Aonla and Phulpur units in Uttar Pradesh 1.75 and 0.52 mmscmd, respectively, Khribco Sahajahanpur 0.978 mmscmd, Tata’s Babrala plant 0.88 mmscmd, Indo Gulf Fertiliser 0.48 mmscmd and Shriram Fertilisers’ Kota plant 0.62 mmscmd.
Similarly, Krishak Bharti Coop’s Hazira unit will get 1.37 mmscmd, Gujarat State Fertilisers and Chemicals’ Vadodara plant 0.72 mmscmd, Rashtriya Chemical Fertiliser’s Trombay unit 0.95 mmscmd and Thal 2.1 mmscmd, and Nagarjuna Fertiliser would get 1.55 mmscmd.
Sources said the petroleum ministry had decided the allocation among the fertiliser units on the basis of gas shortage in the urea manufacturing factories, as detailed by the fertiliser ministry.
Allocation of 1.3 mmscmd to Iffco’s Kalol plant has been withheld while that to some other plants like Brahmaputra Valley Fertiliser Corporation was not allocated due to lack of pipeline connectivity.
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First Published: Tue, Mar 10 2009. 02 09 PM IST
More Topics: RIL | Reliance | KG-D6 | Tata Chemicals | Indo Gulf |