Reliance refuses to budge in D6 gas talks with NTPC

Vol 13, PW 1 (18 Jun 09) Midstream & Downstream

Reliance is refusing to change the terms in a proposed Gas Sales Agreement (GSA) with NTPC for 2.67m cm/d of D6 gas, as stalemate between the two companies shows no sign of abating.

“NTPC is the only company that has not signed a GSA with Reliance for D6 gas,â€‌ reports a source. “Reliance has already signed 27 GSAs for D6 gas and cannot renegotiate or re-open the terms for just one company.

â€‌ Reliance, it seems, is worried that if it agrees to change terms for NTPC, other companies that have signed GSAs will ask for similar changes. On no account, argues Reliance, can NTPC benefit from terms that are different to those given to others.

“If the changes were company-specific these could have been addressed,â€‌ adds our source. “But NTPC is raising basic commercial issues, which are non-negotiable.

â€‌ NTPC is one of several power generation companies to benefit from an oil ministry inspired carve-up of D6 gas, and has been told it can receive 2.67m cm/d for five of its power station: 1.76m cm/d for Kawas in Gujarat; 300,000 cm/d for Gandhar, also in Gujarat; 450,000 cm/d for Dadri in Uttar Pradesh; 130,000 cm/d for Faridabad, also in UP; and 30,000 cm/d for Anta in Rajasthan. But NTPC is shying away from signing the GSA, arguing that it is not ready to pay marketing margins or penalties to Reliance as set out in the draft agreements.

Contacted by this report, NTPC says it, “will definitely take D6 gasâ€‌ subject to the terms of the GSA “dovetailing with our business interests.â€‌ NTPC goes further, saying it has specific needs.

“We are a large business with specific needs.â€‌ NTPC wants the GSA to exclude the Kawas and Gandhar power stations, presumably because they are the subjects of ongoing litigation.

In 2002 Reliance won a NTPC tender to offer 12m cm/d for 17 years at $2.34/mmbtu, but is disputing the un-limited liability clause and has yet to sign a contract.