Countdown to Reliance's agreement with IOC

Vol 6, PW 4 (24 Apr 02) Midstream & Downstream

THREATS OF a long-drawn out arbitration - where ultimately both sides would have been losers - were clearly too much to contemplate for either Reliance or Indian Oil.

PETROWATCH understands the two companies exchanged a furious volley of letters before good sense prevailed and they signed two new marketing agreements on 28th March this year. We learn that just six days before signing, both sides were on the brink of arbitration, with Reliance insisting proceedings should be heard outside India while Indian Oil wanted it to be heard within India.

Fearing costly litigation, both sides agreed to draw back and on 28th March, Nikhil Meswani of Reliance and marketing director P.K Agarwal of Indian Oil signed a 'Cancellation Agreement' annulling their 8th March 1999 product sales agreement, which was heavily weighted against IOC.

They replaced it with two new agreements: a two-year deal from 1st April 2002 to 31st March 2004; and a five-year deal from 1st April 2004 to 31st March 2009. The agreement from 2004 to 2009 is short on detail, but the one from now till 31st March 2004 has a detailed breakdown of how much product IOC will lift from Reliance over the next two years (see below).

Name of Product 2002-2003 2003-2004 Superior Kerosene Oil 1.54m tonnes 1.58m tonnes Petrol 279,000 tonnes 272,000 tonnes High Speed Diesel 4.3m tonnes 4.28m tonnes Liquefied Petroleum Gas 1.36m tonnes 1.36m tonnes