New Delhi: The Union government has asked Reliance Industries Ltd (RIL) to cut gas output from its eastern offshore oil fields in the D6 block of the Krishna-Godavari (KG) basin so that imported fuel stocks can be cleared, a demand that the company has rejected.
The petroleum ministry had in a meeting on 30 April asked RIL to explore cutting output so that imported liquefied natural gas (LNG) accumulating at Petronet LNG Ltd’s Dahej terminal in Gujarat can be sold to customers.
“Reliance has not agreed to or planned to cut down on the output of gas from the KG basin,” an RIL spokesperson said.
Petronet, which ships gas from Qatar on a long-term contract, is facing a glut after three fertilizer plants that used LNG as feedstock shut down for maintenance and a power plant owned by state-owned NTPC Ltd tripped.
The schedule for outgo of gas from Petronet’s Dahej terminal was less than the inflow, creating a backlog of 75 million cu. m, or 96% of the inventory limit, according to the minutes of the meeting.
The problem has been complicated by Petronet’s decision to lease out the Dahej terminal to Gujarat State Petroleum Corp. Ltd for import of nine cargos of LNG even though state-run gas utility GAIL (India) Ltd did not have capacity in its pipelines to evacuate any gas beyond the domestic output and already contracted long-term LNG.
Industry observers expressed surprise at the decision, saying imported expensive gas was being prioritized over cheaper domestic gas. “The priority should be to use cheaper fuel first and use expensive gas later,” an official said. Petronet imports gas from Qatar at $5.42 per million British thermal unit (mmBtu), while KGD6 gas is priced at $4.20 per mmBtu.
The 30 April meeting also decided to set up “a coordination mechanism” between the domestic producers and Petronet so that commitment to buy overseas LNG is met.