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Court lifting RIL gas sales ban of “national importance”

The Bombay High Court have been asked by the government to lift a stay on sale of gas from Reliance Industries Ltd's Krishna-Godavari field off the Andhra coast

The Bombay High Court have been asked by the government to lift a stay on sale of gas from Reliance Industries Ltd's Krishna-Godavari field off the Andhra coast. The court had asked the Mukesh Ambani-controlled firm to refrain from creating any "third-party" interest on gas from the field in connection with a contractual dispute redressal petition filed by Anil Ambani's Reliance Natural Resources Ltd.

Earlier this year, the Bombay High Court had ordered RIL not to enter into any third-party contract for the gas the company planned to produce in January this year.

The entire volume of gas is under dispute, with Anil Dhirubhai Ambani Group company RNRL and government-owned power producer NTPC laying claim to a major volume of the gas.

If the court lifts the ban on sale of gas, RIL would be able to sell gas to entities other than the two companies — Reliance Natural Resources Ltd (RNRL) and NTPC Ltd, with whom it is locked in a court battle.
Government stands to loose revenue if the natural gas produced in KG Basin by Reliance Industries is sold at higher price to power and fertilizer plants.

"Efforts are on to get the court injunction vacated to help early gas production from the K-G basin. The government has requested the Bombay High Court for lifting injunction on gas sales," petroleum secretary R S Pandey said on the sidelines of an industry meet organised the PHDCCI on Wednesday. “Till the stay is vacated, gas production (from the block) cannot begin. This is an issue of national importance,” he added

The oil ministry had recently become a party to the case. On Tuesday, Anil Ambani had questioned the oil ministry's move, saying it was "siding with a private company". Many saw this as an attack on the ministry for what Anil saw as the government helping Reliance Industries.

Pandey explained that the government had intervened to get the ban on gas sales lifted. Other officials said the ministry had become a party to the case after both attorney general and the law ministry gave their opinion that the government was indeed an "affected party" by the court stay on gas sales.

Reliance Natural Resources pumps 28 million cubic metres per day of gas from the field as part of a family agreement signed by the two sides during the demerger of the Reliance empire. The agreement allegedly envisaged the gas would be sold at the price of $2.34 per mBtu (million British thermal unit) that RIL had quoted to state-owned generation utility NTPC for 12 million cubic metres a day in 2004. A ministerial panel last year set the price at $4.20 mBtu. The court had stayed sale of gas to anyone other than RNRL and NTPC.

The government felt it had to intervene as RIL had said it would start commercial pumping from December-January. The government's argument is that since gas cannot be stored like oil, the stay on sale will put it in a piquant situation and put the exchequer to a loss even in case the field was to be capped and idled.

RIL will initially produce 15-20 million cubic metres of gas from Dhirubhai-1 and 3 fields, the first two of the 18 discoveries and 40 million cubic metres by mid-2009.