PM refers CBM pricing proposals of RIL, Essar to PMEAC
New Delhi: Prime Minister Manmohan Singh has referred the coal-bed methane or CBM pricing proposals of Reliance Industries and Essar Oil to PMEAC Chairman C Rangarajan for examination, Oil Minister S Jaipal Reddy said.
Speaking at the Economic Editors Conference here, he said he had requested Prime Minister to form a committee of secretaries or Prime Minister's Economic Advisory Council Chairman be asked to examine CBM price proposals of RIL and Essar.
Essar, he said, had proposed to sell CBM gas at USD 4.2 per million British thermal unit to a fertiliser plant, while "RIL had got customers to say they will buy gas for USD 12 or more".
"There is big difference. So I wrote to the Prime Minister. Prime Minister referred it to Rangarajan," he said.
The Oil Ministry has been trying since July to get an Empowered Committee of Secretaries (ECS) to vet the separate price proposals of RIL and Essar but had not succeeded so far.
Reddy last month wrote to Prime Minister saying the issue of pricing of natural gas to be produced from below coal seams, called CBM, would be submitted to the Cabinet Committee on Economic Affairs (CCEA) for consideration.
But, before that, the price proposals need to be either scrutinised by a Committee of Secretaries headed by Cabinet Secretary or by the Prime Minister's Economic Advisory Council Chairman C Rangarajan, Reddy wrote to the Prime Minister.
While Essar has proposed to price CBM from its Raniganj block in West Bengal at USD 4.2 per million British thermal unit, RIL for its Sohagpur CBM blocks in Madhya Pradesh wants a rate equivalent to the price at which India imports gas.
The Oil Ministry is willing to go with Essar proposal to sell gas from Ranigang block to Matix Fertilizer and Chemicals at USD 4.2 per mmBtu even though the Directorate General of Hydrocarbon (DGH) opined that the two were related parties.
In case of RIL, the ministry is unwilling to accept a rate of USD 12.93 per mmBtu at USD 100 a barrel oil price. The DGH had in April recommended acceptance of this price as it was arrived on an arms-length basis. But on June 22 it said the price was not in conformity with the government policies.
RIL wants to price CBM gas at 12.67 per cent of JCC, or Japan Customs?Cleared Crude, plus USD 0.26 per mmBtu. At USD 100 per barrel oil price, gas will cost USD 12.93 per mmBtu.
The formula proposed by RIL is the same at which Petronet LNG Ltd, the nation's largest liquefied natural gas importer, buys 7.5 million tonnes per annum (30 million standard cubic meters per day) of LNG from RasGas of Qatar.
RasGas charges 12.67 per cent of JCC and Petronet, which is headed by Oil Secretary, pays a further USD 0.26 per mmBtu for shipping the gas in its liquid form (LNG) from Qatar.