An Empowered Group of Ministers (EGoM) is likely to meet on July 27 to decide if exceptions to the present policy can be made so that Anil Ambani Group?s Reliance Industries Ltd (RIL) proposed power plants can get fuel from Reliance Industries?s KG-D6 block and fields of other operators.

ADA Group?s power arm, Reliance Power (R-Power) has applied to the Oil Ministry for supply of 28 million cubic metres a day of gas for its proposed power plants at Shahapur in Maharashtra and Bharuch in Gujarat. Also, the group has expansion plans for its Samalkot plant in Andhra Pradesh, as per sources from direct knowledge.

Since the existing natural gas allocation policy only deals with operational power plants and a new policy for future plants is pending, the ministerial panel has to consider making exemptions in the existing policy if it has to allocate gas to ADAG?s proposed power plants.

The plants are a minimum of two years away from commissioning and the EGoM will have to see if any deviations can be made in the present policy, which stops reservation of gas for future plants, can be made to accommodate the units.

However, Gas Utilisation Policy (GUP), formulated by the same EGoM, states that allocation of the scarce fuel can be made only to plants which are ready to receive gas and are connected by pipelines.

"A consumer may wait for gas, but gas cannot wait for a consumer is the essence of the GUP," an EGoM official pointed out on July 27.

Since KG-D6 fields have finite resources, output will have to be capped and volumes above that reserved for production when R-Power plants are built. Alternately, the government will have to cut supplies to existing customers to accommodate future plants of R-Power.

Sources has also mentioned that the government may decide to give some gas to R-Power from the Deendayal fields that Gujarat State Petroleum Corp (GSPC) is targeting to put on production in 2012, around the time first unit of R-Power may be commissioned. Gas from ONGC?s KG-DWN-98/2 block, which sits next to KG-D6, may also be considered.

Besides, RIL has till date signed up for 57.8 million standard cubic meters per day of its output on long term contract. It has told the Oil Ministry that it can sign up for another 2.2 mmscmd on long term since output from KG-D6 can be sustained only at 60 mmscmd. The peak output of 80 mmscmd from KG-D6 fields, set to kick-in sometime next year, is to last for 7-8 years.

Recently, Reliance Natural Resources or RNRL got a rude jolt on Monday as the stock tanked 27% following the announcement of the share-swap arrangement for the RNRL- RPower merger. The merger was probably the only way out for RNRL, which was virtually left with little potential business opportunities after recent developments.

Source: Dalal Street Investment Journal
Dalal Street Investment Journal