RIL Ind ties up with fertiliser Co

New Delhi: Reliance Industries (RIL) has signed gas sale and purchase agreements (GSPA) with 12 urea manufacturers in a move that may result in annual fertiliser subsidy savings of Rs 3,000 crore for the Centre.

The GSPA involved supply of 15 million standard cubic metres per day (mscmd) of natural gas from its Krishna Godavari basin D6 block to 15 urea units across the country. These belong to Nagarjuna Fertilisers and Chemicals Ltd, IFFCO, KRIBHCO, Gujarat State Fertiliser Company, National Fertilisers Ltd, Tata Chemicals Ltd, Chambal Fertilisers and Chemicals Ltd, Indo Gulf Fertilisers Ltd, Shriram Fertilisers and Chemicals Ltd, Gujarat Narmada Valley Fertiliser Company, and KRIBHCO-Shyam Fertilisers.

The companies also signed gas transportation agreements with Reliance Gas Transportation Infrastructure Ltd (RGTIL), a Reliance Group company. The East-West pipeline built by RGTIL would be used to transport gas from D6 block to fertiliser units by inter-connecting with pipelines belonging to GAIL (India) Ltd and Gujarat State Petronet Ltd (GSPL).

Production push:
Mr P.M.S. Prasad, President and CEO (Petroleum), RIL, claimed that the supply of D6 gas to these units would help enhance the country’s urea production by approximately seven million tonnes per annum (from the existing 20 mt). “We expect this to reduce our fertiliser subsidy bill by Rs 2,000-3,000 crore annually,” Mr Atul Chaturvedi, Secretary, Department of Fertilisers, told press persons.

The GSPA envisages supply of D6 gas at a landfall price of $4.2 per mBtu. This price excludes pipeline transmission tariff, marketing margin, and State levies. The gas is expected to be available to customers in Andhra Pradesh such as Nagarjuna Fertilisers’ Kakinada plants at $5.7-5.8 per mBtu and those in Maharashtra and Gujarat in the region of $6 per mBtu. RIL has levied a marketing margin of 13.5 cents per mBtu.

Transmission tariff:
Though the transmission tariff is to be decided by the Petroleum & Natural Gas Regulatory Board, RGTIL has indicated a range to its customers. The tariff would be levied on the volume of the gas and could range from $0.17 to $0.45 within Andhra Pradesh and $0.93 outside the State.

The initial production from the D6 block is estimated at 40 mmscmd, of which 15 mmscmd is to be supplied to the fertiliser sector. The gas is expected to start flowing in the next few days and supplies will begin from mid-April. RIL plans to start production with 10-12 mscmd of gas in April and will be ramped-up to 40 mmscmd by July and reach peak production of 80 mscmd in a year.

The Petroleum Secretary, Mr R.S. Pandey, said that a separate agreement between GAIL and fertiliser companies for transporting D6 gas through the public sector gas transporter will be signed shortly. This will facilitate supply of the gas to customers in the North including IFFCO and National Fertilisers.

A major concern expressed by the fertiliser industry was on gas supplies to urea units in the event of decline in production from the fields. “Both sides have agreed that the gas allocation in such a circumstance will be left to the EGoM,” a fertiliser industry source said. In case of any other disruptions there is a force majeure clause.

As regards an agreement with the power companies for gas supply, Mr Prasad said, “We are waiting to get a list of power companies and then initiate talks. We have already sent draft agreement for Ratnagiri Gas and Power Pvt Ltd (erstwhile Dabhol).”