ISSUES AND MARKETING STRATEGIES

OF NATURAL GAS IN INDIA

Submitted by:
Shankar Deo Rajpal
(MBA Oil & Gas)
Date: 25 /07/09 University of Petroleum and Energy Studies

University of Petroleum and Energy

gy Studies, Dehradun
 Acknowledgement

It gives me immense pleasure to be attached with Niko Resources Limited, Hazira which

has provided me a very unmatched training in my summer Internships. I place special thanks

to the Chief General Manager Mr. Amar Jha for helping me in deciding my topic. I heartily

thank my training Heads Mr.M.P.Karan and Mr.Ravi Sharma for guiding me throughout

my training tenure. I also thank Mr.T.Shreekanth and Mr.Shammy Prahladan for

extending their support during my training.

Special my project mentors Mr. L.C.Ram and Mr.Peeyush Gupta for helping me

throughout my project “Issues and Marketing Strategies of Natural Gas in India” and

discussing details pertaining to the same.

Thanking you

Shankar Deo Rajpal

University of Petroleum & Energy Studies, Date:

Dehradun,Uttrakhand.
 Index
1.Introduction 1

2.Government initiatives 2

2.1. NELP Regime 2

2.2. PNGRB 2

3.The Growth of Gas Infrastructure 3

3.1. Reliance proposed gas pipelines 3

3.2. Route and Length of Proposed Pipelines 3

3.2.1. Kakinada-Hyderabad-Goa-Uran Ahmedabad pipeline: 3

3.2.2. Jamnagar - Bhopal - Cuttack pipeline: 4

3.3. Gujarat Gas Grid Project: 4

4. Gas Pricing : 5

4.1. Gas pricing 1956-1986 5

4.2. Gas Pricing : 1987-1992 6

4.3. Gas Pricing : 1992-1997(Kelkar Committee) 7

4.4.Gas Pricing : 1997-2002 (Shanker Committee) 7

4.5.Gas Pricing: 2002 onwards (GoI) 11

4.6. Gas Pricing w.e.f. 1.7.05. 12

4.7. Briefing on the PSC as follows: 13

4.8. The summary of Gas Price evolution in Indian Market 14

4.9. Gas Pool Account 16

5. NELP:

5.1. Provisions relating to attracting Investment 17

5.2. Investment Multiple (IM) 17

5.3. NELP PSC Provisions related to Gas Prices 17

 5.4. Principles for Valuation of Natural Gas 18

5.5. Pricing of Gas under the PSC 19

5.6. Option to take Profit Gas of the Government in Cash or Kind 19

5.7. Perspective on taking Profit Gas in Kind 19

5.8. Issues in taking profit gas in Kind 20

5.9. Issues in Gas Pricing under NELP 20

6. Proposal of RIL

6.1. Bid Process Steps 21

6.2. RIL Gas Price Formula 21

6.3. Rationale of 112.5*K 22

6.4. Rationale of linkage to Crude 22

6.5. Expected Delivered Gas Price 22

6.6. Profit Petroleum Sharing for D-6 block 23

6.7. IM Comparison of Gujarat NIKO fields 23

6.8. RIL – RNRL gas mega spat 23

6.9. Value addition from Natural Gas 24

7. Gas Marketing Strategies

7.1. Basis of MGL Pricing: 24

7.2. Domestic segment 25

7.3. Commercial A segment 26

7.4. Commercial B segment 26

7.5. Commercial C segment 27

7.5.1. Working formula 27

7.6. Commercial AC segment 27

7.7. Industrial segment 28

7.8. CNG segment 28

8. LNG
 8.1. Import of LNG 29

8.2. Pricing of R-LNG 30

9. Potential other sources of natural gas: CBM 31

9.1 Contractual & Fiscal Terms 32

9.2. CBM Rounds 33

9.2.1. CBM I 33

9.2.2. CBM II 33

9.2.3. CBM III 33

9.3.Current CBM E&P Activities 34

10. Gas Hydrates 35

11.Gas supplies and prices as of Dec 2007 36

12.Conclusion 38

13.References 39

Tables:

1. Route and length of proposed RIL pipelines

2. Gas prices linkage to fuel oil

3. APM price in 2005

4. PSC for PMT&RAVVA

5. JV gas price table

6. RIL bid process

7. RIL gas price expectation

8. Profit petroleum sharing for D-6 block

9. IM comparison of Gujarat Niko fields

10. Basis of MGL pricing for CGD

11. LNG regasification proposal projects

12. CBM resources in India

13. CBM activity table

14. CBM: Past, present and future supply data

15. Gas supply and prices as of Dec 2008.

Figures:

1. Gujarat Gas Grid

2. Pipeline to link any source to any market

3. Existance of Gas Hydrates in the world

Annexure
 Abbrevations
APM Administered Price Mechanism
ARA Arachidonic acid
BCM Billion cubic Meter
CBM Coal Bed Methane
CIF Cost Insurance Freight
CNG Compressed Natural Gas
Comm Commercial
Cu.Mtr. Cubic Meter
CV Colorific value
D-6 Dhirubhai-6
DGH Director General of Hydrocarbon
E&P Exploration & Production
EGoM Empowered Group of Minister
ER Exchange Rate
EWPL East West Pipeline
FOB Free on Board
GAIL Gas Authority of India Ltd.
GOI Government of India
GSPA Gas Sale and Purchase Agreement
HBJ Hazira Bijaipur Jagdishpur
HOEC Hindustan Oil Exploration Company Limited
HSFO High Sulphur Fuel Oil
IM Investment Multiple
JCC Japanese Crude Cocktail
JS
JS&FA
JV Joint Venture
Kcal Kilo Calories
KG D-6 Krishna Godavri Dhirubhai-6
Kgs Kilograms
Km Kilo meters
LDO Light Diesel Oil
LNG Liquified Natural Gas
LPG Liquified Petroleum Gas
LS/HS Low Sulphur/high sulphur
Mcf Million cubic feet
MCM Metric(thousand) cubic meter
MGL Mahanagar Gas Ltd,Mumbai
MGO Master Gas Offtake
Mkt Marketing
MMBTU Metric Million British thermal Unit
MMSCMD Metric Million standard cubic meter day
MMTPA Metric Million Tons per Annum
MoPNG Ministry of Petroleum and Natural Gas
MSCM Million Stabdard Cubic Feet
MW Mega Watt
N.E. North East
NEC One of Cauvery Blocks
NELP New Exploration License Providers
NG Natural Gas
NTPC National Thermal Power Corporation
OIL Oil India Limited
ONGC Oil and Natural Gas Corporation
PMT Panna-Mukta-Tapti
PNG Piped Natural Gas
PNGRB Petroleum and Natural Gas Regulatory Board
PSC Production Sharing Contracts
PTIM Pre tax Investment Multiple
RGTIL Reliance Gas Transportati Infrastructure Ltd.
RIL Reliance Industries Limited
RLNG Regasified Liquified Natural Gas
RNRL Reliance Natural Resources Ltd.
Rs. Rupees (Indian Currency)
SCM Standard Cubic meter
TNEB Tamil Nadu Electricity Board
USD United States Dollar
VAM Vapour Absorbtion Mechanism
w.e.f. with effect from
 EXECUTIVE SUMMARY

This report focuses on the evolution of the Indian Natural Gas market right from 1960 to
2009. There has been major crest and troughs throughout this tenure along with the improper
and unfounded government decisions. But as the Indian Oil and Gas evolved, government
was keen to take up the responsibility and started the New Exploration Licensing rounds
called NELP. This report also provides the details of NELP and some major provisions
covered. A major achievement of the Natural Gas regulatory was the formation of the
PNGRB. Recently PNGRB has issued a draft regarding the regulation of the Natural Gas
distribution in the country.

One of the major initiatives taken up by the government is the proposal of a network of
natural gas grid throughout the country. The main purpose involve is to transfer the gas from
any source to any destination within India.

This report contains the brief idea about the pricing and the decision taken by the government
regarding the pricing of the natural gas both in the past and in the present. Kelkar committee
and the Shankar committee report are also covered in this report. The literature provides an
idea about the pricing determined under PSC and NELP. The PSC provision like IM
(Investment Multiples), profit in Kind and valuation of natural gas are included in this report.

Pricing details of one of the major Natural Gas suppliers RIL which has started its production
from the KG D6 block recently is also included along with the formula and the rationale
behind that formula. A small comparison of the IMs of RIL and NIKO fields are done here.
This report also provides an analysis of the RNRL-RIL conflict regarding the Gas allocation
and it’s pricing.

This report also holds an argument about the proposals of whether importing natural gas is a
good investment. Whether IPI and TAPI projects would be a good step forward as presently
there are claims for large gas reserves even by GSPC in KG basin.

The CGD (City Gas Distribution), Gas Pricing principles of MGL (Mahanagar Gas Limited,
Mumbai) is considered. The report covers the guideline principle regarding the pricing
principles for the different sections of the users categorized under domestic, commercial,
industrial and automobiles.

The report also contains about the Indian LNG scenario. The LNG projects proposed both by
the government and the private sectors and their respective locations are covered in this
report.

CBM has been taken as a potential Natural Gas sources in the future. Presently India is into
the 4th rounds of CBM blocks allocation.
1.Introduction
One may consider Natural Gas a very uninteresting gas – it is colourless, shapeless and
odourless in its pure form. But it has huge energy producing potential when burnt. A typical
composition table is shown below:

Methane CH4 70-90%

Ethane C2H6 0-20%
Propane C3H8
Butane C4H10
Carbon Dioxide CO2 0-8%
Oxygen O2 0-0.2%
Nitrogen N2 0-5%
Hydrogen Sulphide H2S 0-5%
Rare Gases A,He,Ne,Xe trace
Typical composition of Natural Gas

Natural Gas can be produced from fossil Natural Gas reserves (oil fields, gas fields & coal
fields), biogas and gas hydrates. A wide use of Natural Gas has made it a very important
commodity in the energy market. Natural Gas is used in power generation, domestic fuel,
transportation fuel, fertilizer, aviation, hydrogen production and petrochemicals.

As on date natural gas has not yet acquired a significant position in the Indian Energy Basket.
As per the present situation natural gas consumption is 8% while the consumption of crude
oil is nearly four times (31%) of it. A lot of capital deficit is being faced by the Government
Exchequing as 70% of the crude oil demand is met with imports. As per the Government of
India Hydrocarbon vision 2025’ there would be a lot of development in improving the natural
gas infrastructure in the country.

So far natural gas market has evolved very slowly with estimated just 0.5% of the world’s
total natural gas reserves. The production of natural gas in 1976 from Bombay High, western
coast has changed the situation dramatically in the past as far as Indian Gas market is
concerned. This was soon followed by the South Bassein free gas field in 1978. The major
consumers of this gas were the power and fertilizer sectors and gas being transmitted by
Hazira-Bijaypur-Jagdishpur (HBJ) cross country pipeline.

Government approved New Exploration License Provider (NELP) in 1997 to allow the
participation of foreign companies in production and also approved the PNGRB Act in 2007
for the structured marketing of natural gas. Under NELP the natural gas find in KG basin was
the largest gas find in 2002. The gas production of KG basin is likely to touch 80 mmscmd in
its full stream bring oxygen to the fuel starved existing power and fertilizer sector.

LNG has also been a major focus from the government. So far India has only 7.5 MMTPA
capacity with only two LNG terminals operational. There also has been an attempt to import
gas through pipelines from Iran, Myanmar and Bangladesh. From Iran it was the IPI pipeline.
IPI talks were almost nearing its conclusion regarding of the gas pricing before the political

1|Page
conflict seems to put it into a permanent halt. On the other hand GAIL failed to gain the
victory in the bidding process in Myanmar for LNG and no forwards of the pipeline also
seems to be in the news.

But so far it seems the Indian natural gas potential is such that the country not only needs any
import of gas but in the due future it will start exporting gas in LNG based upon the demand
and supply scenario of energy starving nations at a reasonable price.

At the end of NELP VII rounds there has been 206 contracts signed and 8 hydrocarbon
discoveries are made. Under NELP VIII 70 blocks are offered. And CBM IV too underway
with 10 blocks being offered. The last date for the bid acceptance is 10th of August’09.

2|Page
2.Government’s initiatives
The Government approved NELP in 1997 to attract risk capital and technologies in the E&P
sector. The NELP Policy also emphasized on providing freedom to market oil and gas in the
country at market related prices. So far a total 206 contracts signed under seven rounds of
NELP and 68 hydrocarbon discoveries made so far under NELP. In NELP VIII (under bid
acceptance process) there are 70 blocks offered and under four categories. Type-S (10
blocks), 8 onland, 24 deepwater blocks and 28 shallow water blocks.
Large gas discoveries were made on East Coast ( World's largest gas discovery in 2002).Two
gas discoveries by RIL in D-6 KG deepwater block are almost developed and production has
started in March 2009.

2.1. NELP Regime

• Involves upfront commitment of risk money by Contractor without any liability on
the Government..
• It ensured full exploration/Development cost recoverable in event of discovery
• Cost Recovery limit & Profit petroleum sharing split are supposed to be negotiated
and became biddable parameters.
• Royalty is first charge on Contractor take.
• GOI Profit petroleum escalates rapidly after full cost recovery.This is determined by
the Investment Multiple (IM) in the PSC (Production sharing contract).
• Hence, financial accrual to Government depend upon discovery size and prices
obtained.

2.2. PNGRB
Formation of the Petroleum and Natural Gas Regulatory Board (PNGRB) draft has been the
most encouraging initiative taken by the government for a structured Indian Oil & Gas
market.

Its objective is to regulate refining,processing,storage,transportation,distribution,marketing

and sale of petroleum,petroleum products and natural gas excluding production of crude oil
and natural gas so as to protect the interest of consumers and entities engaged in specified
activities and to ensure uninterrupted and adequate supply and to promote a competitive
markets.

3|Page
3. The Growth of Gas Infrastructure
With the increasing development of the new gas fields there has been a considerable
expansion of natural gas pipelines across several parts of the country.The existing are about
6300km mainly operated by GAIL .The planned are around 8400 kms integrated network to
link any source o any market.

3.1. Reliance proposed Gas pipeline:

• Reliance has set up a Special Purpose Vehicle, Reliance Gas Transportation
Infrastructure Company Limited (RGTIL) to build, own, operate and transfer
pipelines and terminals for marketing and distribution of natural gas.

• RGTIL approached the Ministry of petroleum and natural gas for issuance of
notifications for Kakinada-Hyderabad-Uran-Ahmedabad gas pipeline projects
originating from Jamnagar to connect the proposed regasification terminal at
Jamnagar RIL’s block in Saurashtra and Kutch region and east coast blocks
(offshore).

• RGTIL proposed the following three pipelines:

Kakinada-Hyderabad-Goa

Jamnagar-Bhopal-Cuttack

Hyderabad-Uran-Ahmedabad

3.2.Route and Length of Proposed Pipelines

Route Length (km)
Kakinada-Hydrabad-goa 1121
Jamnagar to Cuttak 1650
Phase-I Jamnagar to Bhopal 828
Phase-II Bhopal to Cuttak 822
Hydrabad – Uran – Ahmedabad pipeline 1079

Table.1

3.2.1.Kakinada-Hyderabad-Goa-Uran Ahmedabad pipeline:

Sources of gas supply to the proposed pipeline are:

• Gas from KG D-6

• Likely gas from adjoining exploration blocks of the Reliance on the Eastern Coast

4|Page
 • Gas from blocks on Western coast.

3.2.2.Jamnagar - Bhopal - Cuttack pipeline:

• LNG import at Jamnagar [currently at hold]

• Reliance exploration blocks in Kutch and Saurashtra region

• CBM blocks in Madhya Pradesh

• NEC-25 block offshore in Orissa

3.3.Gujarat Gas Grid Project:

• Envisages transporting indigenous natural gas from production centers and LNG from
terminals to demand centers all over Gujarat through a high pressure Trunk Pipeline.

• Total length of the gas pipeline planned is 1200-1500 km. Project shall be
implemented in two phases. Phase I, from Vapi to Vadnagar at an estimated cost of
Rs. 12 billion and Phase II mainly in the Saurashtra region at an estimated cost of Rs.
13 billion

Fig.1 : Gujarat Gas Grid

To cover up the whole country,the map in the next page details the existing and planned
integrated Gas Grid.

5|Page
 Fig.2

4. Gas Pricing:
4.1. Gas pricing 1956-1986
Supply of natural gas by Oil India Limited (OIL) started in February 1959, in Assam, and by
the Oil and Natural Gas Corporation (ONGC) in Gujarat in December 1964. During the
1970s, the price charged by ONGC was based on V. K. R. V. Rao committee and was Rs
50/MCM exclusive of sales tax, royalty, etc. The price was valid up to March 31, 1971.

The price of gas for the period April 1 , 1971, to March 31, 1976, was fixed at Rs 66/MCM
by the Governor of Gujarat and Minister, MoPNG.The price was exclusive of royalty, sales
tax and transportation charges and applicable for gas from Cambay and Ankleshwar in
Gujarat.

6|Page
OIL charged a gas price of around Rs 9/ MCM in the Upper Assam region, exclusive of
royalties, duties etc. In the late 1960s, OIL supplied gas at the rate of Rs 52.5 per MCM
exclusive of taxes, duties and transportation charges.

In 1969, ONGC started supplying gas in Assam and adopted the same price. In 1976, ONGC
decided to revise the gas price based on alternative fuel parity. ONGC started supplying gas
to new consumers and old consumers entering in new contracts on the basis of thermal
equivalence based on coal. This resulted in increase in gas price to Rs 210/MCM. In 1977-78,
the price rose to Rs 350/MCM inclusive of royalty but exclusive of transportation charges.

In 1978, ONGC started supplying gas to consumers from Uran, Maharashtra charging gas
prices to consumers on the basis of thermal equivalence of alternative fuels used by the
consumers viz. coal, naphtha and furnace oil. The prices therefore, varied from consumer to
consumer and use to use.

A study on gas pricing by Chief Cost Adviser recommended gas prices of Rs 185/MCM, Rs
250 MCM, Rs 320 MCM for Assam State Electricity State Board, Hindustan Fertilizer
Corporation Ltd & other consumers and tea industry, respectively. Exclusive of royalties,
taxes, etc. and the transportation cost. OIL adopted these prices for the supplies made in
Assam.

On January 1, 1982, ONGC decided to adopt the principle of thermal equivalence in

determining prices of gas for Gujarat and prices were in the range of Rs 2100/MCM to Rs
2,500 MCM for fertilizer and other industries and about Rs 850/MCM for power plants.

The prices in the Eastern Region, which had lower industrial infrastructure facilities, was
much lower than in the Western region. Consequently flaring was much higher in the Eastern
Region than Western region. This resulted in multiple pricing of gas varying from Rs
92.50/MCM to Assam State Electricity Board in the Eastern region to as high as Rs
2,940/MCM for offshore gas supplied by ONGC in the Western region.

4.2. Gas Pricing: 1987-1992 (GoI)

A Committee of Secretaries is subsequently called, the Empowered Group of Ministers.
Committee determined a pricing structure to put gas on parity with other competing fuels in
the key industrial sectors, with differentials to reflect transport costs.

The exception was for gas sold for fertilizer use where a flat tariff was charged.

Fixed uniform gas price based on long-term average cost of production, regardless of the end
use and the location of consumer along HBJ pipeline from January 30, 1987 was as follows:

• Offshore gas at landfall point and onshore gas - 1400/MCM

• Transportation charges for Gas sold along HBJ pipeline - Rs. 850/MCM

• Gas sold in North-Eastern States (with further concession/discount in the price

up to Rs 500 /MCM on a case to case basis).

7|Page
 The above prices were applicable for gas with calorific value ranging between Rs.
8500 to Rs.10, 000 Kcal /cubic meter. For gas supplies with calorific values beyond
this range, there was a discount premium based on the mid-point of the
range i.e., 9,250 Kcal/cubic meter.

4.3. Gas Pricing: 1992-1997 (Kelkar Committee)

Price of natural gas was fixed by Committee headed by Dr.Vijay Kelkar w.e.f.
January 1, 1992 were as follows:

• Offshore gas at landfall point and onshore gas - Rs.1,550/MCM w.e.f January 1, 1992
to be increased each year by Rs.100/MCM till it reached Rs. 1850/MCM
• Transportation charges for Gas sold along HBJ pipeline - Rs. 850/MCM
• Gas sold in North-Eastern States (with further concession/discount in the price up to
Rs 400/MCM on case to case basis).

The prices were exclusive of royalty, taxes, duties, etc

• The producer price payable to ONGC was kept fixed at Rs 1 ,500/MCM and the
difference between the producer price and the consumer price was credited to the Gas
Pool Account - an account set up to compensate gas producers and the transmission
company for the increased costs of producing gas from the North-East.

• The subsidized price in North-East India was decided because the law and order
situation was not conducive to industrial activity and a significant amount of gas was
being flared.

• By 1990, the demand of gas far exceeded availability, requiring GOl's intervention for
gas allocation through the inter-ministerial Gas Linkage Committee.

4.4. Gas Pricing: 1997-2002 (Shankar Committee)

Shankar committee recommended following pricing options:

• Gas prices were so far been fixed on a cost plus basis. Gas prices as fixed for the next
pricing period have to take into account the possibility of imports of natural gas/LNG.
The policy of moving towards market-determined prices has also to be taken into
account.

• Introduction of import parity prices or market-determined prices with immediate

effect would steeply increase the existing gas prices and were a not a feasible option.

• There was a significant difference between the cost of gas production between ONGC
and OIL. This difference is due to factors such as gas field geology and is not due to
mismanagement on OIL's part. A higher producer price has, therefore, to be allowed
to OIL.

8|Page
 • The option of equalizing transportation cost along the HBJ and the other smaller
pipeline systems in Gujarat, Assam, etc., was not considered feasible.

• The transportation cost should be calculated separately for each pipeline so that
the viability of each pipeline can be assessed separately.

• The option of introducing distance-related transportation charges along existing

pipelines such as the HBJ pipeline was not feasible at present as investment deci-
sions have already been taken and units already come up all along the pipelines
based on the assurance of uniform transportation charges.

• Distance related charges were introduced along new pipeline systems and
potential customers should be notified in advance.

• The consumer prices would be the sum of producer prices and transportation
charges and a contribution to the Gas Pool Account which will be Rs.250/MCM
w.e.f. 1 April 1997 and would increase by Rs.200/MCM every year.

The recommended gas price is as follows:

• Producer price of ONGC - Rs.1 ,800/MCM

• Producer price of OIL - Rs. 1,900/MCM

• Transportation charge along HBJ - Rs. 1150/MCM

• Contribution to Gas Pool Account and increased by Rs.200/MCM every year -

Rs.250/MCM w.e.f. 1.4.1997

• These prices refer to gas with the calorific value of 10000 K Cal/Cu.Mtr. and
the transportation charge along the HBJ refers to gas with calorific value 8500
K Cal/Cu.Mtr.

• Concessional price for the North-Eastern States from Rs.l000/MCM be

increased to Rs.1200/MCM and the current discount of Rs.400/MCM be
reduced to Rs.300/MCM.

• The discount was extended to all new units set up within the pricing period for
the first five years.

• There is no uniformity in the Minimum Guaranteed Off-take (MGO) to be

agreed by consumers with GAIL/ONGC/OIL.

• The Committee recommended that the MGO be fixed at 80 percent of the

forecast for a month to be given by the consumer two months in advance.

Along the HBJ pipeline, transportation charges was to be payable to GAIL on the quantity
short-lifted with reference to the MGO.

9|Page
 • “ONGC and OIL have so far not agreed to any penalty for short supply owing
mainly to the low price of gas compared to alternative fuels.”

• “Appropriately, higher gas prices linked to the price of alternative fuels may be
charged in such cases. “

• “Sales Tax on natural gas varies among the states. The variation is from nil
(Delhi) to 19 percent (Gujarat). The Committee felt that the proposal of bringing
natural gas within the meaning of "declared goods" under the Central Sales Tax
Act should be pursued so that a uniform tax at the rate of 4 percent is chargeable
in all states. “

• “A discount of 15 percent is allowed on the gas price for supplies from developing
fields. This discount may be extended to all isolated fields which cannot be
economically connected to the existing gas grids.”

• “In September 1997, GOI while accepting the numbers, related it to the price
parity with fuel oil, announced the pricing policy as a percentage of the fuel oil
parity in different years.”

• “Government also did not differentiate between producer price and the consumer
price.”

• “From October 1, 1997 to March 3, 2000, the consumer price of gas at land points
would be linked to the price of a basket of LS/HS Fuel Oils as shown in the table
below:”

Concessional Price for the

Year General price North Eastern State

1997-98 55%
30%

1998-99 65%
40%

1999-2000
75% 45%

Table.2

• “General Price would vary between the floor price of RS.2, 150/MCM and the
ceiling price of Rs.2,850/MCM.”
• “The concessional price for the NorthEastern States would have a floor price of
Rs.1, 200/MCM and a ceiling price of Rs 1,700/MCM.”

10 | P a g e
 • “A discount of Rs. 300/MCM would also be available for existing consumers in
the NorthEast on a case-to-case basis for new units in these set up during 1997-
2002 for a period of five years.”

• “ The consumer price of gas would be linked to a calorific value of 10,000

cal/m3.”

• “The existing linkage between price and calorific value would be retained till gas
prices can be denominated in terms of calories would be expedited in consultation
with ONGC, OIL and GAIL.”

• “The consumer price of gas will be reviewed at the end of the first three years
(1997-2000) with a view to achieving 100 percent Fuel Oil parity prices over the
4th and 5th years.”

• “ Over the period October 1, 1997 to March 31, 2000, the transportation charge
payable to GAIL along the HBJ pipeline would be Rs. 1,150 MCM.”

• “ The transportation charge will increase by 1 percent for every 10 percent

increase in the consumer price index.”

• “This increase will be paid to GAIL out of the Gas Pool Account. The
transportation charge will be linked to the calorific value of 8,500 k cal/cu.mtr.”

• “In addition to the price as fixed above, the transportation charges and royalty,
taxes, duties and other statutory levies on the production, transportation and sale
of natural gas will be payable by the consumers.”

• “Out of the consumer prices collected by GAIL, GAIL will retain the amount
required to pay for the higher cost of gas purchased from the JVs.”

• “An amount of Rs. 250 crore per year will also be deducted by GAIL from the
consumer prices collected and credited to the Gas Pool Account to continue to
compensate OIL for concessional gas price in the NorthEast.”

• “This will enable it to continue providing a marketing margin to GAIL;

compensate GAIL/OIL for increases in the operating cost on account of inflation
and for utilization on R&D for exploration and exploitation of small fields.”

• “Any balance amount left in the Gas Pool Account after taking care of the above
requirements would be transferred to the Central Exchequer.”

• “ To compensate OIL for concessional gas prices in the North-East, the producer
price of OIL will be Rs.1900 MCM which will be increased by 1 percent for every
10 percent change in the consumer price index.”

• The Gas Pool- Account may be administered by a Committee with the following
members:

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 • JS&FA, Ministry of Petroleum and Natural Gas - Chairman

• JS (Exploration), Min. of Petroleum and Natural Gas - Member

• Director (Natural Gas) Min. of Petroleum and Natural Gas - Member

• “GAIL shall pass on to ONGC and OIL in proportion to the gas supplied by them,
on a net back basis the entire proceeds of sales of gas of ONGC and OIL, after
making deductions under paras above.”

• “Consumer Price was, subject to a ceiling of Rs.2,850 per MSCM and a floor of
Rs.2,150 per MSCM.”

• “Consumer price of gas was intended to be reviewed after 3 years with a view to
achieve 100% Fuel Oil Parity pricing over 4th and 5th year, i.e. in 2000-01 and
2001-02.”

• “ However, this did not happen and the price of Rs.2,850/MSCM continued till
30.06.2005, which was about 34% of the then fuel oil prices.”

4.5. Gas Pricing: 2002 onwards (Gol)

In October 1999 the price reached this ceiling. But as international oil and gas prices
continued to rise in 2000, plans to achieve full import parity were abandoned, and the
gas price remained unchanged up to May 2005.

The price of APM gas of ONGC and OIL was revised effective July 1, 2005. The
salient features were as follows:

• ONGC and OIL produced about 55 MMSCMD APM gas from nominated fields.

• Consumer Price was, subject to a ceiling of Rs.2,850 per MSCM and a floor of
Rs.2,150 per MSCM.

• Consumer price of gas was intended to be reviewed after 3 years with a view to
achieve 100% Fuel Oil Parity pricing over 4th and 5th year, i.e. in 2000-01 and
2001-02.

• However, this did not happen and the price of Rs.2,850/MSCM continued till
30.06.2005, which was about 34% of the then fuel oil prices.

• Consumer price of APM gas was increased from Rs. 2,850 per thousand SCM to a
fixed price of Rs. 3,200 per thousand SCM on an adhoc basis.

• All available APM gas would be supplied to only the power and fertilizer sector
consumers against their existing allocations along with the specific end-users
committed under Court orders! small scale consumers having allocations up to
0.05 MMSCMD at the revised price of Rs. 3,200 per thousand SCM.

12 | P a g e
 • This price is linked to a calorific value of 10,000 kCal/m3.

• The gas price for transport (CNG), Agra-Ferozabad small industries and other
small scale consumers having allocations up to 0.05 MMSCMD would be
progressively increased over the next 3 to 5 years to reflect the market price.

4.6. Gas Pricing w.e.f. 1.7.05.

• Under Gas pricing order dated 20.6.05.

• The consumer price was revised to Rs.3,200/MSCM for the following categories
of consumers. It was also decided that all the APM gas (estimated at around 55
MMSCMD) will be supplied to only these categories.

a. Power sector consumers

b. Fertilizers sector consumers

c. Consumers covered under court orders

d. Consumers having allocations of less than 0.05 MMSCMD.

• Price of gas supplied to small consumers and transport sector (CNG) increased
over the next 3 to 5 years to the level of the market price.

• With effect from 06.06.2006, the APM gas price to small consumers and CNG
sector has been increased to Rs.3840 / MSCM.

• It was decided that the gas price to other consumers, which were hitherto getting
gas at APM price through GAIL network, would be market determined.

The table below sums up the price of APM gas in the country:

S.No. Customer Category Price (Rs/MSCM) Price (USD/MMBTU)

1 Power & Fertilizers 3200 1.98

2 City Gas & Small Consumers 3840 2.37

up to 0.05 MMSCMD

3 Power & Fertilizers - North East 1920 1.19

4 City Gas & Small Consumers 2304 1.42

up to 0.05 MMSCMD -North
East

Table.3
13 | P a g e
 Note:

Prices are @ 10000 Kcal/SCM

Exchange Rate is SBI TT Selling rate on 28.05.07 i.e INR 40.76/USD

• In May 2007, the Tariff Commission recommended a revision of the APM gas prices
as follows:

• Revised the producer price to Rs. 3600/MSCM for ONGC

• Revised the producer price of OIL to Rs. 4040/MSCM for which it will sell at
60% in the North East region.

PSCs contain the following pricing provisions: -

JV Price formula Floor Ceiling Commencement of

Price Price gas supplies

PMT Price linked to a basket of international average 2.11 3.11 June'97-Tapti Feb'98-
of preceding 12 months Fuel Oil prices Panna-Mukta
(Cargoes FOB, Med basis, Italy (1% sulphur);
Cargoes CIF, NEW basis ARA (1% Sulphur);
Singapore, FOB, HSFO 180 Mid est (3.5%
sulphur); Arab gulf, FOB, HSFO, 180 Mid est
(3.5% sulphur))

Ravva Price linked to average of Fuel Oil for 1.75 3.00 Apr'97
preceding 12 months (3%/3.5% Sulphur
residual fuel oil of Singapore, FOB. Rotterdam
Barge and Med FOB)

Table.4

In terms of PSC for PMT, the ceiling prices are to be revised to 150% of 90% F.O. basket
(average of the preceding 18 months), after 7 years from the date of first supply.

4.7. Briefing on the PSC as follows:

• PMT sells 4.8 MMSCMD of gas themselves.

• The balance quantity of about 6 MMSCMD, GAIL paid @ $3.86/MMBTU during

2005-06 and is paying @ $4.75/MMBTU w.e.f 1.4.06 based on counter-matching the
price offered by prospective consumers in response to the bid floated by the
consortium.

14 | P a g e
 • This gas is being supplied by GAIL to power and fertilizers sector consumers along
HBJ at APM price and adjustments being made through the gas pool account
mechanism in terms of the pricing order of 20.6.2005.

• This pricing order states that owing to the existing supply linkages and operational
requirements, it may well happen that the customers entitled for APM gas get physical
supplies of gas produced by the joint venture or from suppliers other than ONGC/OIL
at market price and vice versa.

• To operationalize the aforesaid decision, the Gas Pool Account mechanism would be
utilized, with the inflow into the pool account coming from APM gas sales to
consumers not entitled for APM gas at market price and outflow would be for
purchase of non-APM gas to supply to the consumers entitled for gas at APM price.
This arrangement would be subject to the ceiling of existing available APM gas from
ONGC and OIL (about 55 MMSCMD).

• In case of Ravva, the revision of ceiling price is due after 5 years from the date of
supply and the revised ceiling price is to be negotiated between the Buyer and the
Seller in good faith.

• Price revision for Ravva was due w.e.f. April 2002. The price revision has been
effected w.e.f. July 1, 2005 and GAIL has been paying @ $3.50/MMBTU since then.

• The share of this gas going to APM consumers is being charged by GAIL at APM
price, with adjustment through gas pool account mechanism. The total quantity of this
gas is around 1 MMSCMD.

4.8. The summary of Gas Price evolution in Indian Market

Important Aspects Gas Price (USD/MMBTU)
APM Gas Govt. fixed the price of natural gas on 0.86
Pricing 1986 cost plus methodology in 1986 and fixed
a price of Rs.1400/MSCM w.e.f.
30.01.1987
APM Gas Dr.Vijay L Kelkar Committee 0.95
Pricing Prior recommended natural gas price to to
to 1997 Rs.1550/MSCM w.e.f. from 1.1.1992 1.13
with provision of increase by
Rs.100/MSCM per annum
Rs.1850/MSCM till 1995.
APM Gas Shri T.L. Shankar Committee 1.32
w.e.f. recommended to shift gas pricing to
01.10.1997 methodology from cost plus basis to 1.75
import parity pricing w.e.f. 1.10.1997
and link to the cheapest Fuel Oil Basket
with progressive increase in fuel oil

15 | P a g e
 parity as given below :

Year % of Fuel Oil Parity

(other than N.E.)
1997-98 55% Consumer price
has a ceiling of Rs. 2850/MSCM
and floor price of
Rs.2150/MSCM
1998-99 65%
1999-2000 75%

Price review intended after 3 years to

achieve 100% Fuel Oil Parity pricing by
2001-02. However, above ceiling price
continued till 30.06.2005 at about 34%
of then fuel oil prices.

APM Pricing APM gas price was revised by pricing 1.97

Mechanism order dated 20.06.05 to Rs.3200/MSCM
w.e.f. for Power, Fertilizer, consumers covered
01.07.05 under court orders and consumers
having allocation less than 0.05
MMSCMD. 2.36

Natural gas pricing for CNG and other

small consumers revised w.e.f.
06.06.2006 to Rs.3840/MSCM – Pricing
for these sectors would be increased in
next three to five years to the level of
market price.

Gas prices to other consumers, which

were hitherto getting gas at APM price
through GAIL network would be market
determined.
Pricing of Price linked to a basket of international 2.11 to 3.11
Gas Under average of preceding 12 months fuel oil
Pre-NELP prices (with a floor of $2.11/MMBTU
Production and ceiling of $ 3.11/MMBTU.
Sharing 3.86
Contracts – The ceiling price were to be revised to
PMT 135% (150% of 90%) Fuel Oil basket
(average of preceding 18 months) after 7
years of commencement of supply. It 4.75
was revised in 2005-06 to $ 3.86
/MMBTU and further to $
4.75/MMBTU w.e.f. 01.04.2006.
Pricing of Price linked to average of fuel oil for 1.75 to 3
Gas under preceding 12 months (with a floor of
Pre-NELP $1.75 to $ 3.0 / MMBTU).

16 | P a g e
 Production The revision of ceiling price was due
Sharing from commencement of first supply and 3.5
Contracts – effected w.e.f. 1.7.2005 to $3.5/mmbtu
Raava JV
Gas
Pricing of This gas was priced at $ 3.3/MMBTU 3.3
Gas Under till September 18th 2006 and was revised 4.3
Pre-NELP after that at $4.3/MMBTU in term of the
Production provisions of the PSC.
Sharing
Contracts –
Ravva
Satellite

Table.5

4.9. Gas Pool Account

• In 1992, the Government established the Gas Pool Account in order to encourage the
development of the gas industry in India and to compensate the companies involved
in the exploration, development and marketing of gas for the low margins on the
development and sale of gas at prices fixed by oil ministry. The landfall price and
producer price is credited to the gas pool account.

• GAIL maintains the Gas Pool Account on behalf of the government.

• Under the current pricing mechanism, GAIL collects Rs. 2.5 billion every year from
natural gas consumers on behalf of the gas pool account.

• This sum is used for the following purposes:

1. Payment of higher international gas prices for the new joint-venture companies;

2. Compensation to Oil India Limited (OIL) for subsidizing prices in the North-East;

3. Compensation to GAIL/OIL for increases in operating cost; and

4. Exploration and development of smaller fields.

The balance is transferred to the Central Exchequer. Gas Pool Account has now been
dismantled.

17 | P a g e
 5. NELP:

5.1. Provisions relating to attracting Investment

• Contractor free to bid exploration inputs and opt for any additionality in work
programme until discovery stage.
• Mandate of Management Committee under chairmanship of Government nominee,
shifts to approval mode after discovery.
• Appraisal/Development Plan submitted by Contractor to be approved to the benefit of
all parties and not in any single party’s Interest.
• Marketing/pricing provisions assure returns based on free marketing market price
driven provisions with the only caveat of sales in India.
• Profit share ratio/split to be determined by pre tax
• Investment multiple (PTIM) formula, which rewards the Government in higher ratios
only at higher levels of revenues.

5.2. Investment Multiple (IM)

IM = Cum. NCIP / Cum. ED
NCIF = Cost Pet. + Profit Pet. + Incidental Incomes - Production Costs - Royalty Payments.
ED = Exploration Costs + Development Costs
(NCIP: Net Cash Inflow)

5.3. NELP PSC Provisions related to Gas Prices

Article 21.3: For the purpose of sales in the domestic market pursuant to this Article 21, the
Contractor shall have freedom to market the Gas and sell its entitlement.

Article 21.6.1: The Contractor shall endeavour to sell all Natural Gas produced and saved
from the Contract Area at arms-length prices to the benefits of Parties to the
Contract.

Article 21.6.2: Notwithstanding the provision of Article 21.6.1, Natural Gas produced from
the Contract Area shall be valued for the purposes of this Contract as
follows:

(a) Gas which is used as per Article 21.2 or flared with approval of the
Government or re-injected or sold to the Government pursuant to

18 | P a g e
 Article 21.4.5 (flaring in case of Associated gas) shall be ascribed a
zero value;
(b) Gas which is sold to the Government or any other Government nominee
shall be valued at the prices actually obtained; and

(c) Gas which is sold or disposed of otherwise than in accordance with

paragraph (a) or (b) shall be valued on the basis of competitive arms
length sales in the region for similar sales under similar conditions.

Article 21.6.3: The formula or basis on which the prices shall be determined pursuant to
Articles 21.6.2 (b) or (c) shall be approved by the Government prior to the
sale of Natural Gas to the consumers/buyers. For granting this approval,
Government shall take into account the prevailing policy, if any, on pricing
of Natural Gas Including any linkages with traded liquid fuels. and it may
delegate or assign this function to a regulatory authority as an when such an
authority is in existence.

5.4. Principles for Valuation of Natural Gas

MoPNG had set-up a Committee under Chairmanship of JS&FA to lay down Guidelines for
approving Gas price/ formula for the purpose of determining Govt take under NELP
contracts. The summary of main recommendations of the gas pricing committee is given
below:
1) Where valuation of natural gas has to be necessarily done by the Government, it may
be done based on the most recent competitively determined price in the region duly
indexed to the present.

2) The indexation shall be as per the provisions of market determined contracts as each
market determined price has a contract which sets out various terms and conditions of
supply of natural gas

3) Typically, long term gas contracts have a clause for periodic gas price reviews. If
price is reviewed as per the contract, that may become the new reference price. For
interim period, it may be linked to percentage increase in price of Furnace Oil (FO).
As it is not only the cheapest liquid fuel, but has also shown least price volatility.

• Above valuation methodology may be applied in cases where actual supply has commenced
but price could not be discovered through market mechanism.
• If the actual price at which any producer supplies to any consumer happens to be higher
than the one arrived at by above methodology, then the higher price shall be reckoned
for the Government take.

19 | P a g e
5.5. Pricing of Gas under the PSC
• As per the PSC contractor is required to sell the gas at competitive arms-length price
to the benefit of the . parties (i.e., the Government and contractor)
• The Contractor is required to get the price formula I basis approved by the
Government for the purpose of valuation of entitlements of the Government and the
contractor.
• Any lower gas price reduces the Government profit petroleum and royalty and may
also delay in reaching the investment multiple tranche where Government gets
progressively higher share. For D-6 block, the Government share increases from 10%
in the first IM tranche to 85% from fourth tranche onwards.
• Imposing a lower gas price on the contractor, apart from being against the provision
of the contract and NELP policy, may send wrong signals to the investor particularly,
at the time when NELP-VIII round has started.

5.6. Option to take Profit Gas of the Government in Cash or Kind

Under the NELP PSCs, the contractor has freedom to market the gas. The Government has a
right to take its share of· profit petroleum including gas in kind.
PSC provides option to take in cash or kind to be exercised on annual basis with option to be
exercised by 30th June for the subsequent year. As per the PSCs, gas price for valuation of
entitlements of the parties is to be determined on the basis of competitive arms-length prices.
The Contractor is required to propose gas formula / basis for valuation purposes for approval
of the Government under the PSCs

5.7. Perspective on taking Profit Gas in Kind

In the past, companies have brought out operational and marketing difficulties in case the
Government exercises its option to take Profit Gas in Kind

• Quantum of Profit gas is dependent on several parameters such as exploration, development

and production costs (on an on-going basis), gas price, gas reserves, gas profile, any
additional development of discoveries in future, and any other investment under the PSC in
future. Hence, the profit gas is uncertain and difficult to predict.

• It will be very difficult for contractors to tie up markets / consumers as the quantum of gas
of both the contractors and the Government, if marketed separately, will be more uncertain.

• The Government has so far taken its entire profit gas share in cash under all the PSCs.

Undertaking total sale of the entire quantum of gas helps the contractor to realise better value
for the parties and also in entering stable gas sales contracts due to larger volumes. In case the
gas specification and delivery pressure of the Government share of profit petroleum is
20 | P a g e
different than the customers of the contractors, it will involve additional costs and will reduce
the value of the project. The option to take profit gas in kind by the Government may be
perceived as unfriendly and may deter inflow of investment in the E&P Sector, especially for
gas due to Governmental interface at the production and sale stages. Any distortion in
consumption pattern of a natural resource by artificially suppressing price may result in
inefficient use of the resource. The cost of replacing the used up reserve continues to
increase, and, hence needs to be provided for. As per estimates, there could be wide variation
in the Government share' of profit petroleum on year-to-year basis and the Government
nominee needs to prepare the marketing plans to address this situation. Consequently,
substantial volume of gas may have to be sold on spot basis leading to sub-optimal realization
of gas price.

5.8. Issues in taking profit gas in Kind

By choosing to take its profit gas in kind, the Government will have consequential legal
obligations to lift the gas and provide infrastructure / facilities synchronous to the contractors'
development plans / facilities .Government's ability to sell its gas at market price may be
hindered looking to ground realities in comparison to the contractor. This would impact on
Government revenue and lead to huge financial loss.
The estimate of Government share of profit petroleum depends on several parameters. It
would be quite difficult to estimate the share. There could also be wide variation on year-to-
year basis. This will have implications in planning infrastructure and capacities by the
Government or Its nominee. In case the gas specification, delivery pressure, etc, is different
for different set of consumers, it will involve additional costs leading to reduction in profit
petroleum.

5.9. Issues in Gas Pricing under NELP

Government is under contractual obligation to allow pricing of natural gas at arms length
principle to the benefit of all Parties to the Contract.
• For gas valuation purposes, for determination of government take, Government is
committed under the contract to adopt competitive, arms length sales.
• Lower price would depress total revenues and delay triggering of higher profit share
for the Govt.
• Lower cash flows owing to lower prices may leave smaller kitty for distribution of
profit petroleum with the Government.
• Any state intervention in price discovery may be perceived as investor unfriendly
and deter investment in the prospective deep water blocks which are big ticket
investments. Future gas discoveries globally are expected more from deeper and
ultra deeper offshore areas and hence costly.
• Any violation of contractual provisions may result in legal disputes delaying
production.

21 | P a g e
 • Any subsidization of price would have to be extended across the board to all kinds
of consumers irrespective of their pricing exigencies.

6. Proposal of RIL
6.1. Bid Process Steps
Milestone Time line
1 Issue of Invitation to Quote 9th April 2007
letters to
customers along with GSPA
Term Sheet
2 Last date for receipt of 26th April 2007
clarifications
3 Issue of clarifications along 4th May 2007
with revised GSPA Term
Sheet and price formula
4 Receipt of all the bids 11th May 2007
5 Evaluation of Bids 14th May 2007
6 Submission of application to 18th May 2007
MOPNG for price Approval
7 Target date for Signing of 15th June 2007
GSPA Term Sheets with
customers

Table.6

6.2. RIL Gas Price Formula

SP (Rs/mmbtu) = 112.5 x K + ER x (CP-25)^0.15+ C
Where,
SP is the Sales Price of Gas in Rs/mmbtu (NCV basis)
CP is annual avg. Brent crude price for the previous FY
with a cap of $65/bbl and a floor of $ 25/bbl,
ER is the avg. US$/INR exchange rate for the previous FY,
K is 1 for ER between 25 and 65, or
ER/25 when ER is less than 25 or
ER/65 when ER or more than 65
C is the premium in Rs /mmbtu (positive integer) quoted
by customer

22 | P a g e
6.3. Rationale of 112.5*K
Rs 112.5 / mmbtu (or $2.5/mmbtu @ Rs 45/US$) provides a floor to the price in case crude
price falls below US$ 25 /bbl
• Floor price of $2.5/mmbtu represents conversion factor of 1/10 at crude price of $25/bbl
• 'K' factor provides correction to the floor price in case of run on the Rs/US$ exchange rate
Rs 65/US$ or below Rs 25/US$

6.4. Rationale of linkage to Crude Oil

Globally gas prices have generally tracked oil prices
• Energy conversion factor from crude to gas ($/bbl to $/mmbtu) is '1/6'
• However, to reduce volatility of crude prices:
- an inverse exponential power has been used to dampen the linkage to oil prices
- linkage to previous year's average oil price further implying single gas price for entire year
- cap of $65/bbl insulates the customer from very high oil prices

6.5. Expected Delivered Gas Price

Andra Maharashtra Gujarat HBJ/Price
$fmmbtu
Pradesh
A Commodity
price
Basic Price 4.33 4.33 4.33 4.33
Marketing 0.12 0.12 0.12 0.12
Margin
Sales Tax Rate 12.0% 3.0% 3.0% 3.0%
Sales tax 0.52 0.13 0.13 0.13
Total 4.85 4.46 4.46 4.46
Commodity
price

B Transportation
EWPL 0.17 0.93 0.93 0.93
GAIL 0.14 0.30 0.30 0.60
Service Tax 0.04 0.15 0.15 0.18
Total 0.35 1.38 1.38 1.72
Transportation

A+B Total Delivered 5.20 5.84 5.84 6.18

Table.7

Basic Gas Price at ER 01 Rs45/US$ and Brant Price 01 $651bbl

Mkt Margin of Rs 54/mmbtu converted at ER of Rs45/US$
EWPL tariff _ indicative tariff 01 RGTlL for East West Pipeline
GAlL Tariffs based expected reduction tariffs on account of higher capacity utilization
Expected Delivered Price $ 5.2 to 6.2 / mmbtu depending on location and taxes

23 | P a g e
6.6. Profit Petroleum Sharing for D-6 block
Invest Multiple(IM) tranche Government share of profit Contractor’s share of profit
petroleum petroleum
Less than 1.5 10% 90%
1.5 - 2.0 16% 84%
2.0 - 2.5 28% 72%
2.5 - 3.0 85% 15%
3.0 - 3.5 85% 15%
More than 3.5 85% 15%
Annual Cost Recovery Limit: 90%

Table.8

6.7. IM Comparison of Gujarat NIKO fields

Government share of profit petroleum
Invest Multiple(IM) tranche Hazira Surat
Less than 1 0% 0%
1.0 - 1.5 10% 20%
1.5 - 2.0 20% 30%
2.0 - 2.5 25% 40%
2.5 - 3.0 35% 50%
3.0 and above 40% 60%

Table.9

6.8. RIL – RNRL gas mega spat

Before 2006 demerger of the Ambani family assets in 2006 it was adjudicated that RIL will
supply KG gas to RNRL at the price converged for NTPC and at the same condition.Which
was $2.34/Mcf (subjected to EGoM approval) which is nearly half of the EGoM approved
unit sale price of $4.2/Mcf plus taxes and transportation for calculating its share of profit and
royalty.

The recent settlement at Bombay High court approves the RNRL claims for the same and
allocated 28 mmscmd RIL’s KG gas to RNRL at $2.34/Mcf for 17 years. But this was the
result of the family dispute. RIL has requested the Government that to continue as per the
PSC, as the nations interest is ahead of family’s interest.The question now arises whether this
decision would impact government revenue of rent being received.

If RIL loses, would mean two things. One, since RIL-NTPC settle is still under pipeline and
seeking approval from EGoM, there is an unclear benchmark for the RIL-RNRL pact. Two, if
the Gas is sold at a lower price , the royalty etc will still be calculated at government’s price.

RNRL would supply natural gas to the Gas fired mega power projects of Reliance Power at
Dadri which would then become the world largest gas fired power plant in the world with the
capacity of 7540 MW.

24 | P a g e
6.9. Value addition from Natural Gas

Along with fuel and petrochemicals, LPG is also the major product that can be produced from
natural gas. The deplorable thing about the RIL’s gas is that inspite of having a low colorific
value it is methane rich. So it can be not used in petrochemicals and LPG production. It is to
be understood that the network of natural gas has the limitations that it cannot reach the
remote area while LPG as a fuel can be major source of fuel to most of the remote areas of
this India.

7. Gas Marketing Strategies

7.1. Basis of MGL Pricing:
MGL has categorized its customers into the following table:

Category Customers Major Fuels No. of Consumption

Replaced Customers (In SCMD)

(Feb 07) (Feb 07)

Domestic Households Domestic LPG >2.8 Lakh 113711

Com A Small Hotels & Commercial 683 31166

(<200SCMD) Restaurants LPG

Com A Charitable / Domestic LPG/

Concessionary religious/ Commercial
(<200SCMD) Government LPG
Institutions etc.

Com B Small Scale Commercial 115 48092

(200 - 1000 industries, 3 star LPG, LDO,
SCMD) hotels, small LSHS, FO
hospitals etc.

Com C 5 Star Hotels & Bulk LPG, 15 35794

(1000 and Hospitals LDO, LSHS, FO
above)

Com AC 10
(> 200 TR)

Industrial Small / medium LSHS, FO 40 156258

(1000 and sized industrial
above) establishments

25 | P a g e
CNG Four wheelers, MS, HSD, LPG 1023570
Buses & Autos

Total 1408591

Table.10

7.2. Domestic segment

• Primarily NG used is used for domestic cooking and partially for water heating also
(Non commercial application)

• Replaces Domestic LPG cylinders (of 14.2 Kgs)

• PNG prices indexed to alternative fuel replaced i.e. domestic LPG.

• Domestic PNG Price was initially kept at 10% discount to domestic LPG (delivered
price) after Calorific Value (CV) adjustment.

• Sample calculations:

CV of LPG in Kcal / Kg : 10900

CV of Natural Gas Kcal/SCM : 8500

14.2 Kgs of LPG equals : 10900*14.2/8500 = 18.21 = Approx 18 SCM of NG (After

CV adjustment)

Price of LPG cylinder (delivered) as on Sep 1997:Rs 137.87

Delivered Price of PNG as on Sep 1997 = 90% x 137.87/18 = 6.89

Present delivered price of PNG is Rs 11.82 per SCM

• Price of domestic LPG cylinder has changed over the years, due to reduction in
subsidy. As on date the price of 14.2Kgs cylinder stands at approx Rs 297.

• Over the years MGL has increased PNG prices, however increase is not inline with
increase of LPG prices due to:

• Price sensitive market

• Large customer base

• Encourage potential customers to convert to PNG

26 | P a g e

Considering the present prices of LPG and PNG the discount stands at 29% (approx)

7.3. Commercial A segment

• Commercial A segment: Predominantly in this sector PNG is used for commercial
cooking, as in case of small restaurants and hotels.

• Replaces Commercial LPG cylinders (of 19 Kgs)

• PNG prices indexed to alternative fuel replaced i.e. commercial LPG.

• Commercial A PNG price was initially kept at 10% discount to commercial LPG
(delivered price) after Calorific Value (CV) adjustment.

• Commercial A concessionary: Predominantly in this sector PNG is used for non

commercial cooking mainly as in case of charitable, religious, government
hospitals etc.

However presently, they are not offering this price benefit to any new customers as
Govt. has withdrawn this benefit from above establishments.

• Replaces domestic LPG cylinders (of 14.2 Kgs)

• PNG prices indexed to alternative fuel replaced i.e. domestic LPG.

• Prices in this segments is same domestic PNG.

• Price of commercial LPG cylinder has increased over the years. As on date the price
of 19 Kgs cylinder stands at approx Rs 752 i.e. approx Rs 40 per Kg.

• Over the years MGL has increased Comm A prices, however increase is not inline
with increase of LPG prices reasons being:

• Encourage more customers to convert.

• Large section were illegally using the domestic LPG cylinder of 14.2 Kgs,
hence for them price benefit was not attractive.

Considering the present prices of LPG and PNG the discount stands at 46% (approx)

7.4. Commercial B segment

• Commercial B segment: Predominantly in this sector PNG is used for various
industrial applications such as industrial heating, stream generation, drying, tin
printing, commercial cooking, etc.

27 | P a g e
 • Replaces Furnace Oil (FO) / Low Sulphur High Stock (LSHS), Light Diesel Oil
(LDO), High Speed Diesel (HSD), commercial LPG cylinders (of 19 Kgs).

• PNG prices indexed to LSHS.

• Commercial B PNG price are kept at 10% discount to LSHS (delivered price) after
Calorific Value (CV) adjustment.

• Commercial B prices are revised every month in line with variations in the LSHS
prices.

7.5. Commercial C segment

• Commercial C segment: PNG is used for commercial cooking, stream generation,
water heating, dryers, ovens etc.

• Replaces Furnace Oil (FO) / Low Sulphur Heavy Stock (LSHS), Light Diesel Oil
(LDO), High Speed Diesel (HSD), bulk LPG.

• PNG prices indexed to Fuel basked comprising of LSHS, LDO and LPG.

• Commercial C PNG price are calculated in the following manner:

• 70% weightage given to LSHS price (after CV adjustment and 10% discount)

• 27% weightage given to LDO (after CV adjustment)

• 3% weightage given to LPG (after CV adjustment)

This % mix was arrived based on fuel usage pattern of this consumer category.

7.5.1. Working formula:

Basic price (BP) of NG for Comm C = BP ((70% of LSHS *0.9)+ 27% of LDO + 3%
of Bulk LPG)

• Commercial C prices are revised every month in line with variations in the above fuel
prices.

7.6. Commercial AC segment

• Commercial AC segment: PNG is used for direct fired air conditioning machines
(VAM). This category was introduced in June 2000.

28 | P a g e
 • Replaces electricity as fuel.

• Prices of NG was indexed to electricity initially with 10% discount. Discounted price
was offered to customers so that they can recover additional capital cost in 2 to 3
years period.

• 3% price escalation was envisaged for a period of first 3 years.

• Present delivered price of NG for this sector is Rs 8.784 per SCM.

• In view of price revision of non APM gas, NG price for this segment is in the process
of revision. The proposed price (delivered) is Rs 13.877 per SCM

7.7. Industrial segment

• Industrial segment: PNG is used for industrial use or application such as heating,
steam generation, powder coating, furnaces etc.

• Replaces Furnace Oil (FO) / Low Sulphur High Stock (LSHS), Light Diesel Oil
(LDO), High Speed Diesel (HSD), bulk LPG.

• Prices are indexed to LSHS price after CV adjustment and 10% discount.

• For the period effective from April 1, 2003 to December 31, 2004 CAP and FLOOR
for selling prices were fixed:

CAP - Rs.7.50 per SCM

FLOOR - Rs.5.66 per SCM

• Subsequently the above CAP and FLOOR prices were extended till June 05. After
GAIL price hike of Rs. 0.5 per SCM towards transportation charges, the cap price was
raised to Rs 8.00 per SCM.

• In June 2006, gas price was increased by Rs.4.50 per SCM for Non APM sector
(I&C). Subsequently, MGL had decided to pass-on only Rs. 2.50 per SCM to the
industrial customers and absorb balance Rs. 2.00 per SCM. Hence, industrial basic
gas price was revised from Rs.8.00 per SCM to Rs.10.50 per SCM w.e.f Dec 2006.

7.8. CNG segment

• CNG segment: CNG is used as fuel for Natural Gas Vehicles (NGVs)

• Replaces Petrol, Diesel, LPG.

29 | P a g e
 • Initially CNG price was decided based on following parameters:

• Converted vehicle owners to recover the additional cost towards CNG kit
within a period of 1 year and

• Operating cost (towards fuel) of CNG vehicle is atleast 50% cheaper than that
of petrol vehicle.

• As on date the CNG is almost

• 70 to 72% cheaper than Petrol

• 40 to 45% cheaper than Diesel

• 50 to 55% cheaper than LPG

• Increase in CNG prices over the last few years were solely due to increase in either
gas purchase price or statutory taxes / duties.

8. LNG

8.1. Import of LNG:

Government initiative to satisfy the energy needs extended to import LNG. Petronet LNG
( Promoter being GAIL,ONGC,IOCL and BPCL) was the first venture initiated under GOI.
Petronet LNG further proposed projects in various areas but so far only one of its terminal is
operating at Dahej, Gujarat with a capacity of 5 MMTPA with long term contract with
RasGas, Qatar.

Shell Hazira regasification terminal was the 2nd venture with Total Elf Fina as 26% partner.
Presently its main purchaser is GGCL and rest being put into HBJ pipeline on the RLNG
price.

The other proposed projects are as follows:

Port Location State Company/Consortium Capacity(mmtpa) Expected

commissioning
date
Pipavav Gujarat British Gas, 2.5
NTPC,Sea King
Infrastructure
Maroli Gujarat UNACOL 2.5
Dahej Gujarat Petronet LNG 5.0
Kakinada Andra Pradesh Indian Oil, 2.5
Petronas,BP
Amoco,Kakinada
Port Co.

30 | P a g e
Ennor Tamil Nadu TIDCO + Partner 5.0
Kochi Kerala Petronet LNG 2.5
Tuticorin Tamil Nadu Indian Gas 2.5
Vizag Andra Pradesh Total/HPCL 2.5
Manglore Karnataka Finolex 2.5
Hazira Gujarat Shell 2.5
Trombay Maharashtra Tata Power,TOTAL 3.0/6.0
Dabhol Maharashtra Dabhol Power 5.0

Table.11

8.2. Pricing of R-LNG

• Contract signed with Rasgas, Qatar for supply of 5 MMTPA LNG (equivalent to
about 18 MMSCMD] by Petronet LNG Limited and supplies were commenced from
April 2004.

• The price for LNG has been linked to JCC crude oil under an agreed formula.

• However, the FOB price for the period up to December 2008 has been agreed at a
constant price of $2.53/MMBTU. This translates to RLNG price of $3.86/MMBTU
ex-Dahej terminal.

• To make the price of RLNG affordable, EGoM has decided for pooling of prices of 5
MMTPA RLNG presently being imported from Qatar with the price of new RLNG
being imported on term contract basis.

• Ministry issued orders on 6.3.07. The pool price ex-Dahej of RLNG for various
consumers would be about US$ 4.92/MMBTU.

31 | P a g e
9. Potential other sources of natural gas: CBM
Coal bed methane as a source of clean natural gas has immense potential for India, especially
since there are rich sources in the Jharkhand and West Bengal regions. Methane gas is found
trapped in fissures in coal and extraction reduces explosion hazards in mines, thereby
reducing safety risks for miners. When burnt as fuel, methane has zero emission, whereas
when released into the atmosphere its global warming potential is 21 times that of carbon
dioxide over a span of 100 years.

There are, however, several factors that have hampered the realisation of this clean fuel
potential in India. Though the country is rich in reserves of bituminous coal containing
methane, the reserves are at depths of up to 1,200 metres and need appropriate drilling
equipment apart from know-how for extraction.

This, and the fact that converters to extract methane from coal beds are not available locally,
makes it imperative for India to have ties with other countries for technology and know-how
transfer. China is on the job, showering tax breaks and subsidies on coal bed methane
extraction companies and having an agreement with the US for technology inputs. India
should speed up its coal bed methane projects in order to generate clean fuel in areas easily
accessible from coal-bearing zones.

Methane capture and its utilization from coal mines is not being undertaken in India due to:

• Lack of latest technology

• Lack of expertise and experience

• Vague perception that commercial viability of exploitation and utilization of

Methane is doubtful.

Sl. State Coalfield/Block Area of Prognosticated Remarks

No delineate CBM Resource
d block as per DGH
(Sq. KM) In In
trillion billion
cubic cubic
feet meter
1 West a. North 232 1.030 29.17 Marginal
Bengal Raniganj resource
b. Eastern may be in
Raniganj Jharkhand
c. Birbhum 500 1.850 52.38

32 | P a g e
 250 1.000 28.32
Sub Total 982 3.88 109.87
2 Jharkhand a. Jharia 69.20 2.407 68.16
b. East & West
Bokaro 93.37 1.590 45.02
c. North
Karanpura

340.54 2.181 61.75

Sub Total 503.11 6.178 174.93

3 Madhy a. Sohagpur 495 3.030 85.79
a b. Sohagpur
Pradesh c. Satpura 500

500 1.000 28.32

Sub Total 1495 4.030 114.11
4 Gujarat a. Cambay 2400- 11 to 311- May not be
Basin 3218 19.4 549.39 immediately
available
because
ONGC has
active
conventiona
l Oil & Gas
operations.
*As per
Advanced
Resources
Inc.
Grand Total 2980.11- 25.088– 710.39-
3798.11 33.488 948.73

Table.12 : Prognosticated Resource of CBM

9.1. Contractual & Fiscal Terms

The CBM policy provides an attractive fiscal & contractual terms, which are considered to be
one of the best in the world, with freedom to work in a

33 | P a g e
free and flexible working environment.

Some of the attractive terms offered by the Government are:

• No participating interest of the Government.

• No upfront payment.
• No signature bonus.
• Exemption from payment of customs duty on imports required for CBM operation.
• Walkout option at the end of Phase-I & II.
• Freedom to sell gas in the domestic market.
• Provision of fiscal stability.
• Seven years tax holiday.

9.2. CBM Rounds

9.2.1. CBM I

DGH in close interaction with Ministry of Coal (MOC), carved out several prospective CBM
blocks in different coalfields of the country, generated CBM related data and prepared
Information Dockets & Data Packages. In May 2001, for the first time in the country,
Government offered 7 blocks under 1st round of CBM bidding, out of which 5 blocks were
awarded and contracts signed. Contracts for another 3 blocks awarded on nomination basis
were also executed.

9.2.2. CBM-II:

Under 2nd round of CBM bidding 9 blocks were offered through international competitive
bidding in May 2003 with bid closing date of 15th October 2003. A total of 14 bids were
received for 8 out of 9 blocks offered. Contracts for these 8 awarded blocks were signed in
June 2004.

9.2.3. CBM-III:

International competitive bids have been invited by Government of India for 10 CBM blocks
under 3rd round of CBM bidding with bid closing date of 30th June 2006. There was an
overwhelming response to the CBM-III round of bidding. For the first time major foreign
E&P companies participated in the CBM-III bidding round. 70 nos. of data packages valued
Rs. 10 crores (approx.) were sold and a total of 54 bids were received for all the 10 blocks,
from 26 companies including 8 foreign and 18 Indian companies. All the 10 blocks received
multiple bids. The blocks were allotted amongst 4 companies /consortium. Contracts for
these 10 awarded blocks were signed in November, 2006.

34 | P a g e
9.3. Current CBM E&P Activities

• Area Opened Up for CBM Exploration 13600 Sq Km

• Blocks Awarded 26 Nos.
• CBM Resources in Awarded Blocks 1374 BCM
• Production Potential in Awarded Blocks 38 MMSCMD
• Exploration activities completed

Phase I 10 Blocks

Phase II 4 Blocks

• Commercial assessment is completed: 4 Blocks

• Development Plan approved 3 Blocks
• Commercial Production commenced 1 Blocks
• Present Gas production 1 lakh SCMD

Activity Commitment Achievement

Core Holes 201 140
Test/Pilot Wells 344 77
Investment (Rs. In Crores) 1350 400

Table.13

The chart shows the comparison of the Indian Natural Gas production and consumption in the
coming future.

PAST PRESENT FUTURE(2017)

Supply 31 bcm 50 bcm 65 bcm

company ONGC is major producer ONGC is major producer ONGC,RIL

Basins Bombay Bombay KG
high,Ravva,PMT,Cambay high,Ravva,PMT,Cambay Basin,Cauvery,Rajastan,Gujarat

Table.14

35 | P a g e
10. Gas Hydrates
Gas hydrates are the chemical formation in which methane is trapped in a cage like structure
of water molecule. These ice structure are found deep in the ocean at very low temperature
and high pressure.

1 volume of methane hydrates would contain 168 volumes of methane at STP.

Fig.3 Figure showing the probable existence of Gas Hydrates.

Presently its not commercially viable. But India has gone into agreement with Russia for the
related exploratory work. As per DGH, India has almost 2000 trillion cubic feet of prognostic
reserves, mostly along the eastern coast. Extraction of methane from Gas hydrates has some
serious implications too.

1. There is about 3000 times more methane present in the hydrates than as in the
atmostphere. So any mismanagement of the same would lead to disaster as methane is
about 11 times more worse than carbon dioxide as a climate warmer.
2. Most of the Gas Hydrates formation are along the coastline. Mining of them would
lead to landslides.

36 | P a g e
11. Gas supplies and prices as of Dec 2007

Source Supply Operators Price ($/mmbtu)

(mmscmd)
Gujarat 42 ONGC
Gujarat- 28 ONGC Price Build up for gas delivered Rs/Mscm
Hazira in Gujarat ( for power and
fertilizer sector)
Rajasthan 0.04 ONGC ONGC producer price 3137
KG basin 4.5 ONGC Consumer price 3200
Tamil 2.49 ONGC Uniform transportation charge 1352
Nadu along HVJ
calculated@(1,150x10,000)/8500
Assam 0.35 ONGC Royalty for 314
ONGC@10%producer price
Uran 10.1 ONGC Sub total 4866
Cauvery 1.7 ONGC Gujarat sales tax @12% of 584
basin subtotal
North East 1.81 ONGC
Total 53.19 Total 5450
ONGC
Oil India All other consumers to be supplied gas at market
Limited related price subject to a ceiling of ONGC and OIL
Rajastan 0.55 OIL pricing to be referred to Tariff Commission Option of
North-East 4 OIL cost plus pricing being considered.
Total OIL 4.55
JVs
Ravva-I 1 CAIRN Energy Since July 1st 05’ Gail is paying $3.5/mmbtu.But from
India Pvt. Nov 2006 the prices were increased to
Limited $3.6/mmbtu(includes royalty)
Ravva 0.9 CAIRN Energy Ceiling price $3.3/mmbtu for GAIL signed at
Satellite India Pvt. five years starting from Sept $4.3/mmbtu.The end
Limited ’01. Revision was made in consumers price would
Dec ‘06 be
$4.4/mmbtu+applicable
taxes+transport
charges.The ceiling
price was set at
$4.75/mmbtu
Panna- 4.8 Initially held PMT sells gas themselves at USD 4.08/mmbtu
Mukta by ONGC.Now (including marketing margin and royalty).Rest is sold
operators are to GAIL at $4.75/mmbtu.
British Gas 4.46
Exploration
and Production
India
Ltd,RIL,ONGC

37 | P a g e
Mid&South 6 Initially held
Tapti by ONGC.Now
operators are
British Gas
Exploration
and Production
India
Ltd,RIL,ONGC
Lakshmi & 1.7 CAIRN Energy Contract I –Floor price: $3.06/mmbtu (2.4
Gauri (Lakshmi)& India Pvt. mmscmd).Ceiling Price: $ 4.46/mmbtu
Gauri 1.27 Limited Contract II- $3.68/mmbtu (1.27 mmscmd)
(Gauri)
Hazira 3.58 Niko $4.05/ mmbtu till March 2007 $4.5/mmbtu from
Resources March 2008 to
March
2009.$5/mmbtu
from March 2009
Bheema-1 0.05 Niko Contract signed for 1 customer is
and North (Bheema)& Resources $3.65/mmbtu and 2 other
Surat 0.21 (North customer is $3.75/mmbtu.All its
Surat) other prices are between
$3.45/mmbtu to $3.65/mmbtu till
a new price is negotiated.
KGD6 40 Reliance $4.20/mmbtu as per the formula approved by EGoM.
RNRL and NTPC prices still to be fixed.
PY-1 field 0.05 HOEC $3.70/mmbtu to PNN power project ( Prices approved
by TNEB)
R-LNG 17.5 Petronet LNG $3.86 ex-terminal price
Dahej
R-LNG 10.5 Shell India $16mmbtu to GGCL at spot trading
Hazira

Table.15

38 | P a g e
12. Conclusion

We shall discuss some issues in this concluding part:

• How should Indian government trade off between the business ethics and the national
interest? If 28 mmscmd of Natural Gas gets supplied to RNRL at nearly half the price
as approved by the EGoM, then there would be huge loss in the estimated provided
projected by RIL. Presently only the family conflict has been resolved, but till now
the government interest is not been considered. RIL is now seeking help from the
government to stick to the PSC contract and follow the interest as per the priority list.
• But if RIL complies with the High Court decision, would definitely make the
Investment multiple tranche quite stagnant even at a quite low scale of somewhat
between 1 to 2.5 leading to low government share in the coming future. As per my
analysis, price for NTPC should be around $3.5/ mmbtu which will get followed by
RNRL as per the contracts. Which would somewhat smoothen the losses covered by
RIL and Government. And if necessary, the deficit of NTPC shall be paid by the
government as similar as bonds as NTPC is now paying high. Secondly, a part of the
consumer allocation and price of the power from Dadri power project should be
regulated by the EGoM. That would serve national purpose as well.
• Another issue is that should India develop its Natural Gas Import infrastructure.
Presently the LNG operating terminals are LNG Petronet at Dahej, Gujrat and Shell
Hazira,Gujrat. Dabhol Power project is due to start in coming months. The major
pipelines projects under talks are the IPI (Iran-Pakistan-India) and the TAPI
(Turkmenistan-Afganistan-Pakistan-India) pipelines. But the present situation shows
that both these projects for importing natural gas would not be so beneficial .Recently,
Government of India has started showing unhealthy attitude towards these tow
pipelines as whether there is really a need for such long term import agreements.
• Looking at the future of the Indian Indigenous gas production, immediate investing in
the import/LNG facility would be improper. With RIL started production (the
production is expected to reach 80 mmscmd in coming months if everything is as per
the schedule) and GSPC claiming a huge gas reserve in the KG basin, almost 20Tcf -
the highest in India so far, soon the Indian Gas market will get over supplied. Rather
investment should be more focussed towards the new pipeline and infrastructure. A
way ahead thought will be thinking of liquefaction terminal for LNG export. Fair
amount of investment should be directed towards building of the CGD networks all
along the small and big cities of India.
• CBM should get a main focus and investment. CBM can really change the Indian Gas
market with more and more of competitive pricing. Indian has huge coal reserves,
which, if utilized for the production of the methane gas would only be a bonus.
Presently 4th CBM rounds for block allocation is under its way.

39 | P a g e
13.References:
Cedigaz (2007): BP statistical review

Infraline Energy Research (2008): Gas Supply and Prices as of Dec 2007

ERM INDIA (2009):GSPC-NIKO: Executive Summary of Drilling & Development of O&G

Wells Hazira Field. Hazira,Surat.

Price Waterhouse Coopers (2008): Oil and Gas, India-Fastest growing free market. New
Delhi, India

CBM India (2008): Analysis and Evaluation of Clean Development Mechanism (CDM)
Prospects for Coal Bed Methane.

Gauri Athanikar(2008):Crisil report on Natural Gas.New delhi,India

http://www.dghindia.org/site/dgh_forthcoming_nelp_round.aspx

http://www.dghindia.org/site/dgh_oil_gas_legislation_rules.aspx

www.petroleum.nic.in

www.thetimesofindia.com

www.indianexpress.com

www.infraline.com

www.bloomberg.com/markets/commodities/energyprices.htm

www.eia.doe.gov/

https://www.vedamsbooks.com/no40225.htm

http://www.dghindia.org/

http://en.wikipedia.org/wiki/Iran%E2%80%93Pakistan%E2%80%93India_gas_pipeline

http://pesd.stanford.edu/publications/india_gas_synth/

http://www.tradeindia.com/exporters-suppliers/c368/natural-gas.html

www.allacademic.com/meta/p252133_index.html

www.methanetomarkets.org/events/2006/oil-gas/.../india_profile.pdf

www.wartsila.com/Wartsila/global/docs/en/.../bright_future.pdf

39 | P a g e
Annexure
Indian Gas Demand:
In mmscmd
2007-08 2008-09 2009-10 2010-11 2011-12
Power
79.70 91.20 102.70 114.20 126.57
Fertilizer
41.02 42.89 55.90 76.26 76.26
City gas
12.02 12.93 13.83 14.80 15.83
Industrial
15.00 16.05 17.17 18.38 19.66
Petrochemicals/Refineries/
Internal uses 25.37 27.17 29.05 31.08 33.25

Sponge iron/steel
6.00 6.42 6.87 7.35 7.86
Total
179.17 196.64 225.52 262.07 279.43

Gas Supply as per table 15. is 146 mmscmd. In short future this will increase by 40 mmscmd
with RIL increasing production. So we can consider 186 mmscmd as the present supply.

Supply Demand Gap: In mmscmd

demand supply gap
2009-10 225.52 186 39.27
2010-11 262.07 186 76.07
2011-12 279.43 219.2 60.23
2013-14
2014-15