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Reliance Industries (RIL) has signed gas sale-purchase contracts with the 12 fertiliser firms that have been chosen to receive the first produce from the company’s offshore Krishna-Godavari (KG) D6 fields on the east coast, a company official said. The oil and gas major is expected to start production from the KG basin gas fields in a few days.

Indian Farmers Fertiliser Cooperative (Iffco), Krishak Bharti Cooperative (Kribhco), Tata Chemicals and Indo Gulf Fertiliser were among the companies that signed the gas sale-purchase agreement with RIL for buying the KG D6 gas. RIL would sell gas to the companies at $4.20 per million British thermal unit (mmBtu), as per the contract.

However, the actual cost of the KG basin gas to the fertiliser companies would be higher due to the additional transportation charge, which would be levied depending on the distance and the terms of contract with the gas transporting firms such as Gail and Gujarat State Petronet.

For instance, the delivered price, including taxes and transportation charges, of the RIL gas in Andhra Pradesh would be $5.34 per mmBtu while in Maharashtra it would cost $5.87 per mmBtu. In Gujarat, it would cost $5.87 per mmBtu, and along the Hazira-Bijaipur-Jagdishpur (HBJ) pipeline $6.21 per mmBtu, the official said.

KG D6 gas will come onshore at Kakinada (Andhra Pradesh) from where it will be transported to Bharuch (Gujarat) through a 1,386-km pipeline laid by RIL. In Gujarat, RIL will use the pipeline network of Gujarat State Petronet to take the gas to end-consumers as well as connect to Gail’s HBJ pipeline.

The fertiliser companies have also signed a separate gas transportation agreement with Reliance Gas Transportation India (RGTIL), a Reliance group company, for transporting the gas through its 1,396-km east-west pipeline from Kakinada to Bharuch.

The fertiliser firms will also have to sign separate contracts with Gail and Gujarat State Petroleum Corp for getting the gas delivered to their plant. Gail would charge $0.14-0.60 per mmBtu for providing the last-mile connectivity to consumers through its pipeline network. RIL would use the GSPC pipeline for transporting its gas through Gujarat.

National Fertiliser, Chambal Fertiliser, Gujarat State Fertiliser, Rashtriya Chemical Fertiliser, Nagarjuna Fertiliser and Sriram Fertiliser are the other companies with which RIL has signed contracts.

KG D6 is expected to initially produce a volume that would be enough to meet the fuel deficit of the 15 urea-making plants operated by the 12 fertiliser companies. A total of 15.35 million cu m per day of gas would go to fertiliser plants.

RIL has lowered the margin it would charge on selling the gas to $0.135 per mmBtu from the proposed $0.15 per mmBtu even though its proposed margin was lower than public sector Gail’s $0.17 per mmBtu.

On the HBJ pipeline, National Fertiliser will get 0.65 mmscmd, Chambal Fertiliser 1.15 mmscmd, and Iffco’s Aonla and Phulpur units in Uttar Pradesh 1.75 and 0.52 mmscmd of gas respectively. Besides, Kribhco Sahajahanpur will get 0.978 mmscmd, Tata’s Babrala plant 0.88 mmscmd, Indo Gulf Fertiliser’s Jagdishpur plant 0.48 mmscmd and Shriram Fertilisers’ Kota plant 0.62 mmscmd.

Among non-HBJ customers, Kribhco’s Hazira unit will get 1.37 mmscmd, Gujarat State Fertilisers & Chemicals’ Vadodara plant 0.72 mmscmd, Rashtriya Chemical Fertilisers’ Trombay unit 0.95 mmscmd and Thal 2.1 mmscmd, Nagarjuna Fertiliser 1.55 mmscmd, GNFC 0.342 mmscmd and Iffco’s Kalol plant would get 1.3 mmscmd of gas respectively.

Deepak Fertilisers’ demand for 0.178 mmscmd KG D6 gas and BVFC’s 0.23 mmcmd claim were rejected as the initial gas was to go only to urea-making units.

Source - Economic Times