Reliance industries has made drastic changes in gas supply contracts that will jack up its KG-D6 gas price by 10 per cent over and above the new rate of USD 8.3 coming into effect from next month.
RIL has circulated to urea manufacturing fertiliser units a new Gas Sale and Purchase Agreement (GSPA) for supply of natural gas from its eastern offshore KG-D6 fields from April 1 upon expiry of current 5-year supply contract at month end. The heat produced from natural gas is measured in calorific value. The heat rate is measured in gross (GCV) or net (NCV) basis. One GCV equals to 0.9 NCV and so on a like to like basis billing urea plants the new price of USD 8.3 per mmBtu on GCV would mean an actual rate of USD 9.13 on NCV basis.
RIL has circulated to urea manufacturing fertiliser units a new Gas Sale and Purchase Agreement (GSPA) for supply of natural gas from its eastern offshore KG-D6 fields from April 1 upon expiry of current 5-year supply contract at month end. The heat produced from natural gas is measured in calorific value. The heat rate is measured in gross (GCV) or net (NCV) basis. One GCV equals to 0.9 NCV and so on a like to like basis billing urea plants the new price of USD 8.3 per mmBtu on GCV would mean an actual rate of USD 9.13 on NCV basis.
As per preliminary calculations made by the oil ministry, the new rate in April will be USD 8.3 per mmBtu. But the ministry is unhappy with the rate and has asked for reworking of some of the numbers.
Gas accounts for nearly 80 per cent of the production cost of urea. An increase of USD 1 per mmBtu in gas price translates into an enhanced cost of production of about Rs 1,369 per ton. For 18 million tons of urea produced from gas, USD 1 per mmBtu price increase translates into an increase in cost of almost Rs 2,465.1 crore.A USD 4 per mmBtu increase in rate would mean Rs 9860.4 crore increase in cost of production and using GCV method would mean a further Rs 2,046 crore increase in cost.
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