India Appoints Panel as RIL, Essar CBM Price Differs

With wide gaps between CBM prices offered to customers by Reliance Industries and Essar, India’s oil ministry plans to take the matter to a ministerial panel.

"Reliance CBM price is about three times more than that of Essar. The ministry is in a fix due to the wide variation even though both companies have followed laid down rules. There is a view that the issue should be placed before the EGoM on gas pricing or the cabinet," a government official told Economic Times. 

Some official say that prices from two different producers can vary because CBM quantities are relatively small compared to natural gas produced from Nelp blocks such as Reliance-operated D6.

Essar, following an open bidding process in August last year, discovered that price for bulk of its Raniganj (East) CBM was $4.2 per mmBtu, while Reliance's followed a similar exercise in February for its two blocks in Madhya Pradesh and discovered CBM price in range of over $10 per mmBtu, officials in the Directorate general of Hydrocarbons (DGH) said. 

According to CBM contracts between energy firms and the government, the oil ministry is expected to approve CBM pricing in 60 days of application, but it could not take any decision despite within the deadline. 

According to report in ET, in the case of Essar, some potential customers offered a price as high as $14 per unit, but their requirement was negligible compared to state-run Gail India's bid, which offered $4.2 per unit rate for almost entire output, officials said. 

DGH officials examining the pricing matters of Reliance and Essar say that both companies followed CBM contracts and petroleum ministry's rules to discover their prices of their respective CBM blocks.