Bombay HC to hear RIL-RNRL case on April 29

April 29 will be an important day in the country's gas economy.On that day the Bombay High Court will start hearing the case between warring companies, Reliance Industries Ltd (RIL) and Reliance Natural Resources Ltd (RNRL), to reach a quick decision on who will get access to the huge volumes of gas to be produced from RIL's block in the Krishna-Godavari basin.On April 29, the court will also decide on whether the central government will be admitted as a party to the case between the two companies. The government on Friday filed an application in the court saying it should also be included as a party to the case as it part-owned the gas that RIL is planning to produce from its D6 block in the Krishna-Godavari basin later this year. “We are directly affected by the outcome of the case as it affects ourshare of profits from the sale of the gas. We filed an application in theBombay High Court on Friday,” said a senior oil ministry official.The oil ministry wants the stay order on the sale of the gas from the RILblock vacated as production from the block will not be possible unless RIL first signs supply contracts with gas consumers. However, an order by the court last year prevents RIL from entering into any third party contracts for the sale of gas.RNRL, however, will oppose the central government’s move to become a party to the case, said an RNRL official.According to the earlier order of the Bombay High Court, the entire gasfrom the RIL block has been committed to RNRL and NTPC, and for RIL’s captive use.RIL plans to produce 80 million cubic meters per day (mcmd) of gas from the block at its peak rate. This will almost double the country’s current gas availability.RIL had in January 2006 agreed to supply 28 (mcmd) of gas to RNRL at $2.34 per million British thermal unit (mBtu). This price was rejected by the petroleum ministry, saying it was not arrived at through an arm’s length pricing mechanism. The government had last year approved a selling price of $4.2 per mBtu for the gas.Any price agreement between the two companies, or for any other company, would have to be cleared by the government, as the selling price would determine the government’s share of royalty and profit from the sale of gas.RIL had also entered into a similar agreement with electricity generatorNTPC in 2002. However, Mukesh Ambani-promoted RIL later said that it could not sell gas to NTPC at such a low price as gas prices have sinceincreased.“The dispute between the two companies may delay, or force RIL to cap its production from the D6 block, as the gas contracted with RNRL cannot be sold to any other buyer,” a Delhi-based analyst said.Officials of both companies say it is likely to be a long-drawn battle asthe case could even go to the Supreme Court if any of the parties involvedare not satisfied with the high court’s decision.
BS Reporter / New Delhi April 12, 2008
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