Cabinet decision soon on raising gas prices for Reliance Industries

NEW DELHI: The Cabinet will shortly decide whether Reliance Industries should get increased price for natural gas produced from its old fields in the KG-D6 block from April 1, or it would be asked to first make up for the shortfall in production by selling gas at the old rate, a top oil ministry official said.

"The issue will be decided by the Cabinet soon," oil secretary Vivek Rae told reporters on Tuesday.

The government had earlier approved raising prices of gas produced from all fields in the country. Subsequently, the oil ministry proposed that output from the existing fields of Reliance should be sold at the old rate because the government blames the company for the sharp drop in production. The company blames complex geology for the drop. The matter is under arbitration.

The management committee of the KG-D6 block met on Tuesday to discuss the issue, including appointment of an independent consultant to assess the reasons for the fall in output, government and industry officials said.

The director general of hydrocarbons, RN Choubey, who chaired the meeting said decision on appointing the consultant would be communicated later. The names of experts proposed for the job included Ryder Scott, Gaffney, Cline & Associates (GCA), Netherland, Sewell & Associates and DeGolyer and MacNaughton (D&M).

KG-D6 gas output has dropped to 14 million metric standard cubic meters per day (mmscmd) from about 62 mmscmd in March 2010. The oil ministry has sought the Cabinet's direction in deciding the pricing issue because; it had raised gas prices uniformly without any exception, officials said.

According to the Cabinet note, Reliance will lose Rs 7,176 crore for every one-dollar per unit gas price denied by the government. The oil ministry has moved the note to deny benefit of increased price for gas produced from D1 and D3 gas fields only until it ascertains that the output fell due to geological reasons and it was not deliberate.