Vol 3, PW 2 (17 Feb 99) Midstream & Downstream

Reliance Industries normally gets what it wants.

But not in the north eastern state of Assam. Here, the company is embroiled in a dispute over a gas cracker project, which has taken on political dimensions.

"I get the feeling that Reliance is not taking the project seriously", Prafulla Kumar Mahanta, Chief Minister of Assam, tells Petrowatch, "If they don't implement this project within the next two months, I will throw them out of Assam and invite new bids". Mahantas outburst is provoked by Reliances failure to meet a 31 January deadline to finalise the terms of a gas supply contract with Oil India and ONGC.

Reliance insists Oil India and ONGC make a commitment to supply 6.35m cubic metres a day (cm/d) for the next 15 years, to sustain production of 200,000 tonnes of ethylene per annum. Oil India first agreed to supply 5m t/y and ONGC 1.35m t/y.

Now, Oil India tells Reliance its reserves can not sustain such a commitment unless it makes new finds. In turn, Reliance is demanding financial compensation if Oil India fails to maintain deliveries.

It also insists on knowing the composition of future gas. Oil India insists this is impossible without a crystal ball.

The composition of Assam gas is (on average) 88% methane and 7% ethane (the main ingredient for ethylene) with the balance made up of propane, butane and hexane. In future this could change.

For Mahanta, the project has emotional value. In 1985, as a student leader, he forced Delhi to include the gas cracker project in the Assam Accord, ending years of student unrest.

COUNTDOWN TO DEADLOCK: - August 1985:-Gas cracker promise included in Assam Accord between All Assam Students Union and Delhi, ending agitation against illegal Bangladeshi and Nepali immigration. January 1991:-New Delhi grants Letter Of Intent (LOI) to Assam Industrial Development Corporation (AIDC) for construction of gas cracker.

May 1994:- Reliance signs MOU with Assam for construction of gas cracker at Tengakhat in Dibrugarh district of Upper Assam near the border with Arunachel Pradesh. January 1999:-Central government sets up High Powered Committee with representatives from Reliance, Oil India and government to push through agreement on gas supply contract.

February 1999: - Deadlock on gas supply agreement