New Delhi, September 13:

The Indian petroleum ministry may not intervene in the tussle between state-owned National Thermal Power Corporation (NTPC) and Reliance Industries over gas supplies from the latter’s exploration block.

The problem has arisen with Reliance Industries still to sign an agreement with the NTPC, which had floated a tender last year for the supply of gas for the Kawas and Gandhar gas-based power projects of 1,300 MW each in Gujarat and had selected Reliance on the basis of lowest price bid. Not only has Reliance now expressed its inability to make the gas supplies from its Krishna-Godavari Basin block from 2007, when the expansion of the power projects from 650 MW to 1,300 MW is expected to be completed, but it is also wavering about signing the agreement at the price it had won the NTPC contract.

The situation has changed with global crude prices scaling new heights and gas prices also following suit, making the deal with the NTPC not so attractive for Reliance, which is stalling to re-negotiate the rates, sources said. “The petroleum ministry has received a request from the power ministry to intervene in the matter, but the former may not be able to do so,” a top ministry official said, “The NTPC had thought it had got a good deal but is now unable to enforce the deal with Reliance refusing to comply with the price offer it had made.”

Under the deal agreed by Reliance with the NTPC, the conglomerate had committed to supplying 13 million standard cubic metre gas per day from its offshore finds near the Andhra Pradesh coast to the power projects in Gujarat. The gas supplies were expected to begin from early 2007 at a rate of $2.97 per million British thermal unit (BTU). First, Reliance gave the bad news on the supply front stating that it would begin only in mid-2008. This has followed by the price fiasco. “We had recently done a review and were informed that Reliance gas supplies would be available only from June 2008, unlike the time schedule it had indicated to NTPC,” the official said.

On the price front, there is a price band in the profit sharing contract signed between the exploration company awarded the block and the government for fixing the price of the gas. Here, the official clarified that if the price was too low, the time lag for the profit gas, including government share, would take too long to materialise. Asked if the government would offer its share of profit gas to the NTPC, the official said, “Our first commitment is to the Andhra Pradesh government, which has already assured gas supplies to four projects of independent power producers (IPP). All these projects are currently running below capacity due to shortage in gas supplies.”

“In addition to these four projects, there are four more IPP projects which are in various stages of execution. These projects are being taken up on assurance of gas supplies,” the official said. The government has appointed state-owned GAIL (India) Ltd as its nominee to handle the supplies it would be getting from the Reliance block.