* RIL imports liquefied natural gas at $9 per mmBtu
* Cheaper gas possible if govt permits marketing freedom
* India court to resume gas-dispute hearing on Tuesday
By Pratish Narayanan
NEW DELHI, Oct 22 Indian energy major Reliance
Industries (RELI.BO) is paying more to import liquefied natural
gas to power its refinery in western India than if it were
allowed to receive gas from its own field, a lawyer for the
firm said on Thursday.
Mukesh Ambani-controlled Reliance Industries, India's top
conglomerate, and Reliance Natural Resources RENR.BO, led by
younger brother Anil Ambani, are fighting a legal battle over
terms of a deal to sell natural gas to Reliance Natural at
below the price set by the government.
The deal, part of a private family settlement brokered by
their mother, split the Reliance empire between the brothers in
2005 following the death of their father.
The disputed gas comes from the vast Krishna Godavari
basin, off India's east coast, that is operated by Reliance
Industries. The field is the country's biggest gas find and is
expected to nearly double India's gas output when production
peaks to 80 million standard cubic metres a day (mmscmd).
But Reliance Industries is not allowed to buy its own gas
by the government, which decides who will buy the gas and at
Reliance Industries, which owns the world's largest oil
refining complex, imports LNG at about $9 per million metric
British thermal unit (mmBtu) to power its refinery at Jamnagar,
in the western state of Gujarat, company lawyer Harish Salve
told India's top court.
Media reports citing company's executive director P.M.S.
Prasad have said the price of gas from Reliance's field in the
KG basin could cost about $6.25 per mmBtu.
"If we had more marketing freedom, we would get the gas
cheaper," Salve told a three-member court bench including Chief
Justice K.G. Balakrishnan.
Last December, Reliance commissioned a new 580,000 barrels
per day (bpd) refinery next to its older 660,00 bpd plant at
HEARING TO RESUME TUESDAY
Reliance Industries commenced its initial arguments in the
high-profile dispute on Tuesday, saying a private agreement
signed between the Ambani brothers is not binding on the
company and it can sell gas only at the price set by the
Anil Ambani's Reliance Natural Resources claims the
contract is valid and wants the court to direct Reliance
Industries to supply it with 28 mmscmd of gas for 17 years at
almost half the government-set price of $4.2 per mmBtu.
India's 51-year-old sandstone Supreme Court will resume
hearing the case next Tuesday, with Reliance Industries
expected to conclude its initial arguments by Thursday.
The court will then hear arguments by Reliance Natural,
following which it will consider a petition by the government
to become a party to the dispute.
The government had filed an application asserting it is the
rightful owner of the disputed gas, sparking debate on its role
in gas pricing and marketing and investor uncertainty in a
politically sensitive resource.
Analysts say the government would be under pressure to
adhere to the Supreme Court's verdict on the case, which could
determine future policy on gas pricing and marketing.
For a related Q&A, see [ID:nBOM489932]
For a related timeline, see [ID:nBOM492601]
(Editing by Malini Menon)