RIL,BP to guarantee $1.2 bn for higher gas pricehttps://indianexpress.com/article/news-archive/web/ril-bp-to-guarantee-1-2-bn-for-higher-gas-price/

RIL,BP to guarantee $1.2 bn for higher gas price

The bank guarantee will be encashed if it is proved that the company hoarded gas.

Reliance Industries (RIL) and its partners BP Plc of UK and Canada’s Niko Resources may have to provide a maximum of $1.2 billion in bank guarantees over three years to get nearly double the rate for natural gas being produced from the main fields in KG-D6 block.

The Cabinet Committee on Economic Affairs (CCEA) had on December 20 decided to allow RIL to almost double the price of natural gas from April,2014 provided the firm gave a bank guarantee to cover its liability if gas-hoarding charges are proved.

The bank guarantee,which will be equivalent to the incremental revenue that RIL will get from the new gas price,will be encashed if it is proved that the company hoarded gas or deliberately suppressed production at the main Dhirubhai-1 and 3 fields in the eastern offshore KG-D6 block since 2010-11,sources said.

Considering gas prices will rise from $4.2 per million British thermal unit to $8.2-8.4 after the Rangarajan pricing formula comes into effect from next fiscal,the bank guarantee — the difference of current and new price — or every trillion cubic feet of gas produced will come to $4 billion.