KG-D6 GAS: RIL FACES 40% CUT IN MARKETING MARGIN

NEW DELHI: Reliance Industries (RIL) is facing a 40% cut in the marketing margin it charges on selling its KG-D6 gas to fertiliser and LPG plants after the government notified a ceiling of ₹200 per thousand standard cubic meters (scm) for the levy.

RIL was charging $0.135 per million British thermal unit (mmbtu) as margin to hedge marketing risks on sale of its eastern offshore KG-D6 gas. This is over and above the gas price of $4.24 per mmbtu.

Pursuant to the Cabinet decision of November 18, fixing a maximum marketing margin that firms can charge on selling all domestically produced natural gas to fertiliser and LPG plants, the oil ministry has issued a gazette notification fixing the levy at “a maximum of ₹200 per thousand scm (on net calorific value (NCV) of 10,000 Kcal/scm).”

The marketing margin being fixed at NCV basis on 10,000 kilocalorie (Kcal) will at current foreign exchange rate translate into a levy of $0.79-0.8 per mmbtu, ministry officials said.

Had the government fixed the margin at 8,300 Kcal, the margin would have come to $0.85 per mmbtu. Marketing margin charged on gas produced from state-owned ONGC fields is ₹200 per thousand scm and will not be changed following the notification. The “decision will be effective from the date of Cabinet approval i.e. November 18, 2015,” the notification said.