GAIL and ONGC to get share from Reliance's KG field gas

GAIL (India) and ONGC will get the allocated share (together three mm standard cmpd) of the gas produced from Reliance Industries Ltd's (RIL) Krishna Godavari (KG) gas field.
This view has been taken by the Petroleum Ministry while considering the request of the Power Ministry to divert the feedstock allocated to the existing gas-based LPG (liquefied petroleum gas) plants for the power sector, official sources told. ONGC and GAIL have gas-based LPG plants in the country.

EGoM view
An Empowered Group of Ministers (EGoM) on Gas Pricing and Utilisation in a decision taken early 2008 had said that a maximum of 3 mm cmpd of gas would be supplied to existing-gas based LPG plants. While spelling out the order of priority for supply from RIL's KG field to various sectors, the EGoM had also allocated 18 mm cmpd for the power plants.
Noting that the requirement of the power sector was more than 18 mm cmpd, the EGoM had also said that any additional gas available beyond the categories stated would be supplied to power plants. However, at the recent EGoM meeting, the Power Ministry had requested for diversion of the gas allocated to the LPG plants to power sector. Following this request, the Petroleum Ministry was asked to undertake a cost benefit analysis of gas supply to LPG plants.

Viability issue
Official sources said that the Petroleum Ministry felt that it is more economically viable to give gas for shrinkage to produce LPG rather than burning in power plants. Criticality of the domestically sourced gas can be gauged by the fact that the end price of the product would be lower than the imported gas, the official said. The price of imported gas is almost 60 % higher than the domestically produced gas.
Supply of gas for LPG production would be beneficial, as currently on an annualised basis about 2.5 mm tons LPG are being imported to meet the total demand. The estimated demand for LPG in the country in the financial year 2009 is 12.25 mm tons. While 9.03 mm tons of demand is expected to be met indigenously, the remaining 3.37 mm tons would be met through imports.

GAIL's annual production of LPG is 1.38 mm tons. It currently sources gas from ONGC and Oil India at an administered price. It also buys gas from joint venture partners of Panna-Mukta-Tapti (PMT) fields, and some requirement is met through imports. GAIL has seven LPG processing plants and some are running below capacity due to shortage of gas, sources added.
ONGC has sold (other than trading) 1.04 mm tons of LPG in 2007-08. ONGC produces LPG in three processing plants from gas and condensate, produced in its offshore fields of Bassein & Satellite and Mumbai High, and onland fields of Ankleshwar and Gandhar. RIL is expected to begin production of gas from its D6 field in January 2009.