OilMin orders Reliance gas for core users

Reliance had on May 8 cut supplies to sponge iron makers,refineries and petrochemical plants so that its falling output can meet full demand of core users like fertiliser and power. The move was challenged by sponge iron makers Welspun

Maxsteel and Ispat in the Bombay High Court and Essar Steel in Delhi High Court. The Bombay High Court asked the ministry to hear the petitioners and yesterday8217;s order was issued following that hearing.

8220;Ministry of Petroleum and Natural Gas is competent to take decision on gas supply within the Gas Utilisation Policy laid down by Empowered Group of Ministers EGoM,8221; it said rejecting the steel makers plea that such a decision can only be taken by EGoM which had originally allocated the KG-D6 gas.

The EGoM had in 2008 and then in 2009 allocated KG-D6 gas among users in fertiliser,LPG plants,power units,steel makers,refineries,petrochemical units and city gas firms.

Oil Ministry8217;s curtailment order last month followed drop in production at KG-D6 fields to less than 50 million standard cubic meters per day. Against this,Reliance had signed firm contracts for 57.15 mmscmd and needs another one mmscmd for

the East-West pipeline that ferries the gas.

Core sector users have signed up for 47.6 mmscmd and the ministry wanted their demand to be met first and any gas left after this to go to users in steel,refineries and

petrochemical sector. The order stated the ministry8217;s 8220;directions was in furtherance of EGoM8217;s decisions and has been issued to ensure higher supply to those customers,who were given high priority by the EGoM in its allocation decisions8221;.

8220;In view of the recent shortfall in KG-D6 production,the contractor Reliance has been directed vide ministry8217;s letter dated March 30 and subsequently dated April 21 to supply KG-D6 gas in full to fertiliser,LPG,power and city gas distribution domestic and transport sectors,apart from gas needed for pipeline operation,in larger public interest.

8220;If there is a shortfall in meeting the firm demand of the remaining sectors,pro rata cuts should be imposed on them. It is also made it clear that if production from KG-D6 fields increase,then the supply to various non core customers would also increase. So supply is fully dependent on production,8221; the order stated.

After the supply cut order,non-priority users were getting about one-fifth of their contracted supplies.

The oil ministry directive on curtailment of supplies followed a sharp drop in output at KG-D6 fields. Production fell from 61.5 mmscmd achieved in March,2010 instead of rising to about 69 mmscmd as was projected previously.

Reliance has signed customers for 57.15 mmscmd of gas including 9.57 mmscmd to non-core users.

In face of falling output,Reliance had since July last year made a pro-rata cut in supplies to all its customers,including priority users,the official said.

Of the 57.17 mmscmd of KG-D6 gas for which contracts have been signed,Essar Steel had signed up for 3.2 mmscmd,Welspun Maxsteel 0.40 mmscmd and Ispat 0.59 mmscmd.

Besides,Reliance8217;s petrochemical plant got 1.17 mmscmd and a sizeable 4.21 mmscmd went to refineries,including the Jamnagar units of Reliance.

8220;Supplies to non-core users has not dried up completely as Reliance has some gas left after meeting priority sector requirement,8221; an official said pointing to Essar Steel getting 0.6 mmscmd.

Reliance had previously resisted implementing the order but fell in line once the ministry cited last year8217;s Supreme Court directive which held that only government had the right to decide users of the gas.

The government had accorded highest priority to urea plants,followed by LPG extraction units,power plants and city gas distribution projects while allocating KG-D6 gas.

Sixteen fertiliser plants have been allocated 15.34 mmscmd of KG-D6 gas on a firm or permanent basis,while 28 power plants in the public and private sector have got 28.99 mmscmd.

LPG plants of state-owned gas utility GAIL India had been allotted 2.59 mmscmd.

Reliance8217;s twin refineries at Jamnagar had signed up for 2.34 mmscmd of KG-D6 gas while its petrochemical plants at Gandhar and Nagothane got 1.17 mmscmd.

Implementation of oil ministry8217;s priority order meant that supplies to these has been cut down drastically.