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RIL may drop arbitration proceedings on government’s authority to fix gas prices
The board of Reliance Industries will consider next year dropping the arbitration against the government on the latter’s authority to fix gas prices, sources familiar with the matter said. Reliance must withdraw the arbitration if it wants to charge a higher price for its deep sea gas, according to a recently announced government policy that has more than doubled prices available to gas from difficult fields.
Following the policy announcement, Reliance hasn’t clearly said if it wants to withdraw the arbitration but has initiated the process of developing its deep sea fields in the KG Basin. Reliance and its partners, BP Plc and Niko Resources, have sought contractors for concept engineering and design for deep water field development.
“The fact that Reliance Industries has sought vendors for the field shows that it is keen on developing it. Dropping arbitration is a precondition for availing higher prices for gas from the field. Therefore, once the development plan is ready, it will be put to the board next year which would then take a call if it made sense to develop the field and drop arbitration. It will be a purely commercial decision,” a source familiar with the matter said.
The new policy on gas prices can potentially benefit Reliance’s eight discoveries with reserves of 2.53 trillion cubic feet of gas. The maximum price available to gas from difficult fields in India is $6.61 per unit currently, according to the government formula, which compares favourably with the global spot liquefied natural gas (LNG) rates hovering between $5 and $6 per unit these days. The price available to domestic natural gas from other fields is $3.06 per unit. The price of gas from difficult fields has been linked with alternative fuels. Kevin King Authentic Jersey
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