EGoM on natural gas in February

New Delhi: A high-level ministerial panel may in mid-February take up the oil ministry’s suggestion of key changes in the natural gas allocation policy in view of sharp drop in output from Reliance Industries’ eastern offshore KG-D6 block.

The Empowered Group of Ministers (EGoM) headed by Finance Minister Pranab Mukherjee may meet in the week beginning 12 February, government sources said.

Petroleum Minister S Jaipal Reddy had on Monday stated that no dates of the EGoM meeting has yet been fixed.

Sources said the oil ministry has proposed to stop gas supplies to power producers that do not sell electricity at regulated tariff.

Also, future gas allocations are to be made only to urea fertiliser plants and fuel allocation to phosphates and potassium fertiliser producers be stopped.

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The ministry has also proposed to revise the priority attached to city gas distribution (CGD) networks and place them next to fertiliser and stranded assets of power sectors and before the new demands of fertiliser and power sector.

KG-D6 gas output has fallen to below 39 million cubic meters per day after touching peak of 60 mmcmd in March 2010, prompting the ministry to suggest changes in the allocation policy.

Oil ministry wants “future gas allocations be made only to urea fertiliser plants” as gas allocation to urea has been accorded top priority. Also, supplies to phosphates and potassium fertiliser producers be stopped since the government pays them a fixed subsidy and “cheaper input gas does not lead to lower subsidy burden on the government”.

It wants the EGoM to approve that “all existing and future allocations of NELP gas for power plants will be subject to the condition that the entire electricity produced from allocated gas shall only be sold to the distribution licensees at tariffs determined (or adopted) by the tariff regulator”.

Natural production from KG-D6 has fallen to less than 39 mmcmd from the 61.5 mmcmd peak in March 2010. The output is far short of the 70.39 mmcmd forecast in the field development plan approved in 2006.

The fall forced the oil ministry to first apply a pro-rata cut in supplies to all consumers in July 2010 and with further dip in output it restricted supplies to only core sectors of fertiliser, LPG and power.

PTI