RIL says it signed gas contract, only NTPC did not

Last Updated: Thursday, September 3, 2009 - 17:56

New Delhi: Reliance Industries has said that
it had in December 2005 signed a contract to sell natural gas
to NTPC at USD 2.34 per mmBtu price for 17 years, but it was
the state-run firm that did not reciprocate.

Mukesh Ambani-led RIL said it had on December 14, 2005
sent a signed Gas Sales Purchase Agreement (GSPA) to NTPC
committing to sell gas from its KG-D6 fields at a delivered
price of USD 3.18 per million British thermal unit at its
Kawas and Gandhar plants in Gujarat and asked the state-run
firm to return two signed copies of it.
"NTPC, however, did not sign the GSPA, instead chose to
file a suit against RIL in the Bombay High Court for the
reasons best known to them," RIL Executive Director P M S
Prasad wrote to Power Secretary H S Brahma on August 31. "With
the matter in court, RIL had no option but to withdraw the
offer contained in the signed GSPA sent to NTPC."

NTPC has taken RIL to court seeking performance of the
2004 bid of USD 2.34 per mmBtu (landfall point price), as the
Mukesh Ambani-led company insisted that the price needs nod of
government, which in 2007 approved USD 4.2 per mmBtu as price
of gas.

"I regret to say that if international competitive bidding
processes are intended to be treated with such disdain from
responsible bidder (RIL), the world of business founded on
trust and faith will break down... The fact that (NTPC) had to
file a suit is a telling comment on the facts of the present
case," Solicitor General G Subramanium had said, opining that
NTPC should move the Supreme Court.

Prasad rubbished NTPC`s claims that a contract was
concluded between the two firms and RIL was now trying to
wriggle out because of the sharp upward movement in global
energy prices. "Nothing can be farther from the truth."

"Our own faith in the bidding process is demonstrated by
the fact that in December 2005, when the crude oil prices had
increased to USD 57 per barrel compared to USD 27 per barrel
at the time of submission of the bid, RIL signed the GSPA with
a gas price of USD 2.34 per mmBtu for 17 years," he wrote.
"As of now, the dispute before the Bombay High Court
being whether a binding contract between NTPC and RIL ever
came into being, NTPC`s contention that RIL is trying to
wriggle out of a binding contract is nothing but an attempt to
mislead the government," Prasad wrote.

Yesterday, Power Secretary H S Brahma said "since
Petroleum Ministry has come in the support of NTPC, there is
no need for NTPC to go to Supreme Court."

In an application filed on Tuesday, the government made
it clear that USD 4.20 per mmBtu price approved by it for
RIL`s KG-D6 gas was without prejudice to the state-run firm`s
case against RIL.

It clarified that NTPC`s case against RIL was different
from the dispute between Mukesh Ambani firm and that run by
his brother Anil Ambani.

RIL, Prasad said, had participated in the tender floated
by NTPC in 2003-04 for sourcing 12 million standard cubic
meters per day of gas "in good faith, despite genuine concerns
regarding certain provisions in the draft GSPA."

RIL having emerged as the lowest bidder accepted the
Letter of Intent (placed by NTPC) based on the premise that
the outstanding provisions of the draft GSPA would be agreed
to between RIL and NTPC.

"RIL and NTPC did discuss the provisions of the draft
GSPA for about 16 months in good faith and with a view to
conclude and execute the contract, but the GSPA could not be
concluded," Prasad wrote.

Most of the issues were settled and only RIL`s liability
in case of default was the only contentious issue.

"NTPC`s actions have time and again defied logic and
appear to be driven by factors other than commercial
prudence," Prasad claimed in the letter.

Bureau Report

First Published: Thursday, September 3, 2009 - 17:56

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