RIL told to reduce K-G output to clear imported stocks

The government has asked Reliance Industries to cut gas output from its eastern offshore K-G D6 fields so that imported fuel stocks can be cleared, a demand that the Mukesh Ambani-run company has rejected. The petroleum ministry had, in a meeting on April 30, asked Reliance to explore cutting down output so that imported liquefied natural gas (LNG), accumulating at Petronet LNG Ltd’s Dahej terminal in Gujarat, can be sold to customers.

“Reliance may examine whether it would be possible to cutback the production from K-G D6 fields by some amount for a short period,” according to the minutes of the meeting. “Reliance has not agreed to or planned to cut down on the production of gas from KG basin,” a company spokesperson said.

Petronet, which ships LNG from Qatar on a long-term contract, is facing a glut after three fertiliser plants that used LNG as feedstock, shut down for maintenance and a power plant owned by NTPC tripped. Also, NTPC’s Dadri plant is scheduled to be shut down from Wednesday. The schedule for flow of gas from Petronet’s Dahej import terminal in Gujarat was less than the inflow, creating a backlog of 75 million cubic meters or 96% of inventory limit, according to the minutes.

The problem has been complicated by Petronet’s decision to lease out the Dahej terminal to Gujarat State Petroleum Corp for import of 9 cargos of LNG, even though state gas utility GAIL India did not have the pipeline capacity to evacuate any gas beyond the domestic production and already contracted long-term LNG.

While the ministry did not ask Petronet to defer the import of LNG—Petronet’s contract with RasGas of Qatar has provisions to defer any cargo(s)—and take their deliveries later during the year, it wanted domestic gas production to be cut to accommodate the expensive LNG.