ET reported that Adani Group has offered to buy gas from Reliance's coal bed methane blocks for its city gas distribution projects at a price significantly higher than the price of existing domestic gas but the deal can be clinched only after the oil ministry approves the price.
Adani Group and other potential buyers have approached Reliance to source gas for its markets in Ahmedabad, Vadodara and Faridabad. Sources close to the development said the group's gas distribution arm has backed Reliance's gas pricing formula that will enable it to charge about USD 13 per mmbtu, which is three times the price of gas from Reliance's D6 block and close to the price of imported LNG.
Adani Gas supplies 1.35 mmscmd of gas to over 800 industrial units, 1,000 commercial units and 1,35,000 households in three cities besides operating 65 CNG stations. It expects gas requirement to grow to 1.60 mmscmd by March 2012 and 2.50 mmscmd by March 2014, prompting it to seek Reliance's CBM gas although it is not known which pipeline may be used to transport the gas.
Reliance is seeking approval from the oil ministry to sell CBM from its blocks with the formula that state energy firms use to sell liquefied natural gas. But the government insists it will first identify the customers with whom the company can negotiate a constraint that severely limits Reliance's ability to sell gas at market rates and recover its investment as customers already selected by the government will ask for artificially low prices.
With offers to buy the gas at a market-related price, Reliance has written to the oil ministry saying: "Time and again we have been assuring you that our pricing proposal of our pricing approval we have started receiving direct expression of interest from various interested parties who are ready to take the CBM at the proposed formula. This will rest the notion that the market for incremental natural gas at PLL formula may be sparse," sources close to the development said.
Adani's interest in CBM gas comes after state venture Gujarat State Petroleum Corporation denied selling imported LNG to Adani Gas Ltd.
(Sourced from ET)
