Reliance Industries Limited (RIL) and GAIL (India) Limited today signed a Memorandum of Understanding (MoU) for Joint Co-operation in Petrochemicals. The MoU was signed in Mumbai by Shri A K Purwaha, Director (Business Development), GAIL and Shri Nikhil Meswani, Executive Director, RIL in the presence of Dr. U.D. Choubey, Chairman and Managing Director, GAIL and Shri Mukesh Ambani, Chairman and Managing Director, RIL. The Directors and senior officials from both the companies were also present on the occasion.

Under the MoU, GAIL and RIL will explore opportunities for setting up petrochemical complexes outside of India in feedstock rich countries. Identified opportunities will be examined by a Working Group, consisting of representatives from both the companies. GAIL and RIL will set up a Special Purpose Vehicle (SPV) for setting up petrochemical complexes abroad.

The Working Group is examining such opportunities in Middle East, Russia and FSU countries.

In addition, the two companies will also examine the possibilities of mutual co-operation in the domestic market.

This MoU signed today is the beginning in the area of petrochemical between GAIL and RIL. A Memorandum of Understanding (MoU) was also signed between the two companies on March 15, 2007 for co-operation in identified areas in the natural gas sector including Natural Gas pipeline, City Gas distribution, Coal Bed Methane, Exploration & Production and Operations & Maintenance services.

Describing the development as a major event, Dr. U D Choubey, CMD, GAIL said, “This is an important milestone for both the companies. It is also an extension of the concept of working together, which took shape with the signing of the co-operation MoU in the Natural Gas sector between GAIL and RIL earlier this year. The MoU signed today is the beginning of co-operation in the area of petrochemicals.”

Speaking on the occasion, Mr. Mukesh D. Ambani, Chairman and Managing Director, RIL echoed the feelings of GAIL CMD on the need to work together. He said, “GAIL and RIL are India’s leading companies in the energy and infrastructure sector. The decision will enable us to look for opportunities globally on a competitive scale for the petrochemical business which will further strengthen India’s position on the global map.”

State-owned power utility NTPC will buy an additional 1.5 million cubic meters a day of gas from Reliance Industries at government-approved price of $4.2 per mmBtu to feed its power plants in north India.

The government had allocated NTPC 4.46 mmscmd of gas from RIL’s eastern offshore KG-D6 fields but it currently draws only 1.81 mmscmd due to resistance from state gas utility GAIL to transport additional volumes, official sources said.

Close to 60 per cent of the allocated volumes were for NTPC’s Kawas and Gandhar power plants in Gujarat. But the state-owned firm did not want to use KG-D6 gas at these plants since it was in litigation with the Mukesh Ambani firm over fuel supplies to expansion projects planned at these sites.

So, an Empowered Group of Ministers (EGoM) last year decided that the state gas utility GAIL India will swap KG-D6 gas with fuel from other fields. Under this scheme, gas from western offshore Panna/Mukta and Tapti (PMT) fields that was currently supplied to NTPC’s northern India plants, was to be diverted to Kawas and Gandhar. The deficit at the northern India plants was then to be made up by KG-D6 gas.

Sources said GAIL was however not willing to implement this. It feared that if PMT gas was supplied to Kawas and Gandhar, it would displace the costlier LNG that those plants currently bought. Kawas and Gandhar currently buy imported-LNG at about 50 per cent more price then the delivered cost of RIL gas.

The Petroleum Ministry, they said, a few days back convened a meeting to convey to GAIL in no uncertain terms that the EGoM decision has to be implemented at all cost.

It was decided that 1.5 mmscmd of PMT gas that is currently being supplied to NTPC’s northern power plants would be diverted to Kawas and Gandhar. The northern plants will then be supplied KG-D6 gas.

GAIL markets gas from PMT fields which is priced at $5.65-5.73 per million British thermal unit.

Sources said the scheme would be implemented in couple of weeks. NTPC has contracted 0.79 mmscmd of KG-D6 gas for its Anta plant in Rajasthan, 0.54 mmscmd for Dadri unit in Uttar Pradesh, 0.26 mmscmd for its Auriya plant in Rajasthan and 0.22 mmscmd at its Faridabad unit in Haryana.

With the swap, supplies would go up to 3.31 mmscmd. This would still leave 1.15 mmscmd of allocated quantities to be supplied.

RIL currently produces about 63-64 mmscmd of gas as against a potential of 80 mmscmd as government nominated customers like NTPC are yet to offtake their full allocated quantity.

KG-D6 gas has replaced costly imported LNG at Anta plant to save Rs 150 crore in power generation cost annually.

Source:http://economictimes.indiatimes.com/news/news-by-industry/energy/oil–gas/NTPC-to-buy-15-mmscmd-more-gas-from-RIL/articleshow/5784912.cms