Reliance undecided on Bhagyanagar R-LNG swap

Vol 16, PW 4 (06 Sep 12) Midstream & Downstream

Mighty is the pen! Just a few ambiguous words in an oil ministry letter stand between Hyderabad-based gas retailer Bhagyanagar Gas and 20,000 cm/d of D6 gas.

Desperate to feed growing demand in Andhra Pradesh, Bhagyanagar has convinced GAIL to sell 20,000 cm/d of R-LNG from Dahej under an elaborate ‘swap’ deal sanctioned by the oil ministry. Since there is no pipeline available to transport gas from Gujarat to Andhra Pradesh, the ministry wants Reliance to take the R-LNG from GAIL at Dahej and in return give 20,000 cm/d of D6 gas to Bhagyanagar in Andhra Pradesh.

“Ministry undersecretary Arunoday Goswami wrote to Reliance on August 29 saying that swapping (of gas) has been “noted” by the Empowered Group of Ministers (EGoM) on February 24 and no separate direction is required,” says an industry source. Reliance, he adds, is worrying that Goswami’s letter will not stand up to scrutiny in court if there is a legal challenge by some hapless customer whose supplies get cut.

There is a vast difference between something being ‘noted’ and ‘decided’ – the word Reliance is looking for. Reliance has yet to respond to Goswami’s letter.

Our source says Reliance has been supplying gas in line with EGoM allocations to specific customers for the past two years. “Gas swapping has never been directed by the EGoM and this arrangement for Bhagyanagar cannot be defined as swapping either,” we are told.

When the ministry first proposed the swap idea Reliance demanded a written order specifying the re-allocation of gas from a particular customer to Bhagyanagar. Slippery as ever, the ministry responded verbally that EGoM had approved swapping so no written order was needed.

But Reliance kept up the pressure until Goswami sent the letter on August 29.

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