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Reliance Industries Ltd has
sought government nod
for selling gas that it will
produce from coal seams
for CBM from Sohagpur East
and Sohagpur West in Madhya
Pradesh, at a price close to $13
per mmBtu. RIL has been
pushing for the approval of its
pricing formula which
demands the same price as the
RLNG. With this, the CBM
price will be equivalent to the
price of imported gas that is
being secured by Petronet
LNG. The petroleum ministry
has expressed concerns with
this proposed pricing formula
and thus the matter still
remains pending.
Two weeks ago, RIL wrote to
the Ministry of Petroleum and
Natural Gas saying its pricing
formula of 12.67 per cent of
JCC, or Japan Customs-
Cleared Crude, plus $0.26 per
million British thermal unit
had generated a demand six
times the gas it plans to produce
from Sohagpur coal-bed
methane block by end-2014. At
$100 per barrel oil price, CBM
from RIL's Sohagpur blocks,
will cost $12.93 per mmBtu.
In a letter to the petroleum
ministry, RIL has stated that the
company submitted the proposal
in September 2011 for
approval of the basis for pricing
CBM gas to be produced from
Sohagpur West block held by
the company under a CBM contract
with the government. The
company later made the same
proposal for the Sohagpur East
block. RIL emphasized that
despite provisions of the CBM
Contracts specifying that such
an approval is to be granted
within 60 business days, the
proposal is still pending.
Informing about the other
developments with regards to
this, RIL informed that the
Directorate General of Hydrocarbons
sent a non-substantive
query in November 2011
regarding the proposal to be in
line with CBM contract provision
and the guidelines, which
the company responded to in
the same month.
Further, to give the proposal a
boost, RIL submitted results of
a secondary price discovery
process to the ministry in February
2012. The company reiterated
to the petroleum ministry
that RIL's original proposal
was the best possible basis
on which prices for the gas
could be fixed under the terms
of the CBM contract.
In the letter to the ministry, RIL
stated that as investors, it is a
matter of concern for the company
that in spite of having complied
with all requirements of
price discovery and having submitted
a proposal which is to the
maximum possible benefit of the
'Parties' as per the contract, the
company is yet to receive due
approval for the same. It was
also informed that the company
has invested $82 million of capital
at risk on the basis of the government's
CBM policy in these
two contracts.
The company further
informed that the delay is preventing
it from proceeding
with the timely commencement
of production and has the
potential to cause heavy financial
loss to the company. In
view of the lapse of time period
for consideration of proposal as
per the CBM contract, RIL
requested the ministry for
grant of formal approval to
enable it to proceed further.
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