Bombay HC lifts interim stay on KG D6 gas sale

In the RIL-RNRL case, the Bombay High Court has lifted the interim order on sale of KG D6 gas till the final judgment is passed. RIL will be allowed to sell gas in the interim period at USD 4.2 per million British thermal unit (mmBtu). The judgement is expected by mid March.
In the RIL-RNRL case, the Bombay High Court has lifted the interim order on sale of KG D6 gas till the final judgment is passed. RIL will be allowed to sell gas in the interim period at USD 4.2 per million British thermal unit (mmBtu). The judgement is expected by mid March.

“As a purely intermediate measure, the court has modified its earlier interim order, which will enable gas produced from February end to be sold in accordance with the government of India’s utilisation policy,” Mohan Parasaran, the government lawyer, said.

The government lawyer added that any sale which has to take place will be without prejudice to the rights and contentions of both the parties in the present appeals as well as in the pending suit of NTPC. “While entering into contracts, Reliance Industries will also be mentioning that those contracts will also be subject to the pending proceedings.”

Reacting to the court’s lifting of the stay, Mukul Rohatgi, RNRL’s counsel, said, “If there is any availability of gas in the next one month, RIL has been allowed to enter into contracts with third parties, not exceeding for a total value of five years, which will have a clause saying that all these contracts are subject to the rights of RNRL and if the court holds finally in the judgement that RNRL is entitled to certain rights, then these contracts will stand modified accordingly.”
RIL can enter now enter into contracts of up to a period of five years and this is the five-year period where one cannot change the gas pricing as well because the gas pricing will next come for revision after five years. So the USD 4.2/mmbtu which was decided by EGoM is applicable for the next five years and after that it comes up for revision as per the then pricing formula or the current pricing formula there.

It can enter into a long-term contract but those contracts will be at risk subject to the judgment which might go in favour of either parties.

Timeline for startup

RIL in its latest analyst meet made it very clear that analysts should consider revenues coming in from gas only from April. Even if the gas comes into by February, it is not an easy task because you need to have high pressure gas being pumped out and then pushed down. But before that it will take a month or two before it actually fills the pipeline. This is 1,400 kilometre pipeline, which comes from KG basin and goes up to the end users.

This is a swap agreement, which it might enter into with various gas producers. What it means is that even if it enters into contracts now, gas will start coming in by only April 1 or post April 1. That’s when the revenue impact on RIL will reflect. It will take at least a month or two.

It is learnt that RIL has done some basic procedures of inviting bids and there has been a lot of bids coming in from most of the private fertiliser companies especially in that belt of Andhra, Maharashtra and Gujarat. It means that by the time gas starts pumping in from KG D6, it will be April.