Sundareshan rules out D6 price hike for now

Vol 14, PW 7 (23 Sep 10) People & Policy

Oil secretary S.

Sundareshan has ruled out any rise in the D6 gas price ($4.2/mmbtu) before 2014 - despite mounting pressure from Reliance. Speaking in Mumbai on September 11, Sundareshan admitted Reliance’s original D6 gas price ‘discovery’ of $4.30/mmbtu was only from fertiliser and power companies and did not reflect demand from the hungry steel, refinery or CGD sectors, now receiving supplies.

“Yes, the price discovery was for only two sectors,” said Sundareshan. “There could eventually be a sector-wise price but our present view is the D6 gas price should be the same for all.

” Sundareshan’s comments came amid reports of a letter he received from Reliance vice-president (commercial) B. Ganguly on September 6 asking the oil ministry to increase the D6 gas price by $1/mmbtu.

Ganguly said power producer GMR Energy and steel manufacturer Welspun Maxsteel were willing to pay Reliance $5.25/mmbtu for D6 gas. Today, priced at $4.2/mmbtu, the landfall price of D6 gas is the cheapest in India.

“If the oil ministry allows ONGC to sell C-Series gas at $5.25/mmbtu and CBM at $5.50/mmbtu,” says a source, “why can’t Reliance raise its price; especially as D6 gas is produced from (expensive) deepwater fields” When the government fixed the D6 price in October 2007, subsidised gas sold at just $2/mmbtu, and private sector gas could not be sold at a price exceeding R-LNG, which at the time was $3.86/mmbtu. “The D6 gas price was higher then,” we hear.

“But today the situation is reversed.” In May this year, the oil ministry raised the price of subsidised gas for fertiliser and power customers to $4.20/mmbtu and for ‘non-priority sectors’ like steel to $4.75/mmbtu.

Term LNG nowadays sells at “not less than” $8/mmbtu and PMT gas at $5.73/mmbtu. In weeks ahead, we might see the oil ministry raise the subsidised gas price again, this time to $5.25/mmbtu, for all except fertiliser and power customers.