A PROJECT REPORT ON

KRISHNA-GODAVARI BASIN

Project report submitted to Osmania University as a partial fulfillment

Of the requirement

For the award of Degree of

BACHELOR OF COMMERCE

IN

HONOURS

BY

RATHNASHEELAPATIL

(HALL TICKET NO.2008-1814)

Under the guidance of

MRS.RAJESHWARI

DEPARTMENT OF COMMERCE

OSMANIA UNIVERSITY COLLEGE FOR WOMEN

KOTI, HYDERABAD

MAY 2010

1

DECLARATION

I, RATHNASHEELAPATIL declare that the project work titled “KRISHNA-GODAVARI BASIN” is my original work and has been carried out by me and submitted to the Department of Commerce, Osmania University College of Women, Koti, Hyderabad towards partial fulfillment of requirement for the award of “Bachelor of Commerce”.

Place: HYDERABAD RATHNASHEELAPATIL Date: B.Com hon’s (final)

OUCW, Hyderabad

2

OSMANIA UNIVERSITY COLLEGE FOR WOMENS

KOTI, HYDERABAD, AP

MAY 2010

CERTIFICATE

This is to certify that the project entitled “KRISHNA-GODAVARI BASIN” is the bonafide record of the work done by RATHNASHEELAPATIL bearing hall ticket no 2008-1814 in partial fulfillments of requirements for the award of degree of Bachelor of Commerce during may 2010 under my supervision. It is a bonafide work.

Place: HYD MRS.RAJESHWARIDate: (Project Supervisor)

Department of CommerceOUCW, KOTI

3

OSMANIA UNIVERSITY COLLEGE FOR WOMENS

KOTI, HYDERABAD, AP

MAY 2010

CERTIFICATE

This is to certify that Miss.RATHNASHEELAPATIL is Bonafide student of this college with the Hall ticket no: 2008-1814, worked on the project work titled “KRISHANA-GODAVARI BASIN” under the supervision of MRS.RAJESHWARI project supervisor, Department of commerce, During the year 2010.

Date: PRINCIPAL/HOD

4

ACKNOWLEDGEMENT

I sincerely feel the credit of the project could not be narrowed down to one individual. The whole work is an outcome of the integrated efforts, of all those concerned with it, through whose able co-operation and effective guidance, I could not achieve its completion.

I am highly obliged to Mrs.RAJESHWARI, my project supervisor for his favorable support throughout the preparation of the project and his valuable guidance in giving suggestions that have been instrumental in shaping the project work.

I also take this opportunity to thank our principal Prof. Zubeida Azeem and a special word of thank to Dept Head (Prof) USHAKIRAN, and the entire staff of DEPT. OF COMMERCE for their unconditional support, as regards facilities and information crucial to the completion of my project work.

Last but not the least I would like to express my gratitude to OSMANIA UNIVERSITY for introducing project work as a part of the B.COM curriculum.

RATHNASHEELAPATIL

5

TITLE PAGE

NAME OF THE TOPIC : A STUDY ON KRISHNA-

GODAVARI BASIN

NAME OF THE STUDENT : RATHNASHEELAPATIL

NAME OF THE COLLEGE : OSMANIA UNIVERSITY COLLEGE,

FOR WOMEN

KOTI, HYDERABAD.

YEAR OF STUDY : 2009-2010

NAME OF THE COURSE : III B.COM (HON’S)

HALL TICKET NO : 2008-1814

NAME OF THE GUIDE : MRS.RAJESHWARI

6

INDEX

S.NO PARTICULARS1 INTRODUCTION

2 PROFILE OF KG BASIN

3 DISCOVERY OF KG BASIN

4 HOW GOVT INFLUIENCED ON KG BASIN

5 CONCLUSION

7

CHAPTER-I

INTRODUCTION

8

CHAPTER-I

INTRODUCTION

Krishna-Godavari basin is a peri-cratonic passive margin basin in India. It is spread across more than 50,000 square kilometers in the Krishna River and Godavari River basins in Andhra Pradesh. The site is known for the D-6 block where Reliance Industries discovered the biggest natural gas reserves in India in 2002. It was also the world's largest gas discovery of 2002.At Matsyapuri; men in orange overalls indulge in a different kind of fishing. At this particular location in Andhra Pradesh, these men are scouting for hydrocarbons. About 16 km from Naraspur, Matsyapuri is a part of the Krishna-Godavari basin (KG basin), one of the first sites explored by the Oil and Natural Gas Commission (ONGC) of India. The basin spans the coastal districts of East Godavari, West Godavari and Krishna in Andhra Pradesh. It extends over 28000 sq km onshore, 24000 sq km in shallow waters and 18000 sq km in deep waters. The journey of exploration began in April 1977 when ONGC began prospecting for oil and gas in the basin. In 1978, it drilled its first well near Naraspur and discovered gas there. Since then, it has struck black gold time and again in the rather lucrative basin. The Krishna Godavari basin dispute is an ongoing dispute between Reliance Industries (RIL) and Reliance Natural Resources (RNRL) over the pricing of natural gas found in the Krishna Godavari basin. The dispute was widely covered by the media due to its acrimonious nature, with the Supreme court of India comparing it to a 'fight between two countries'[1]Around 7 trillion cubic feet of natural gas was discovered by Reliance in the Krishna Godavari basin in October 2002.

NEED OF THE STUDY:

9

It was a big step forward today for taking KG Basin gas to every kitchen, vehicle both transport and Government and to every Small Scale industry in the State. To let you know detailed information and importance of the natural gas, I have been selected this “KG BASIN GAS” topic.

OBJECTIVES OF THE STUDY:

To know about how and by whom the “KG BASIN GAS” gas was discovered.

To know about how the Govt influenced on it.

PERIOD OF THE STUDY:

The study covers the period of two year. The survey is conducting during the period of april-may(2010)

METHODOLOGY:

Sources of Data: The study is based on the secondary data.

The secondary source of data comprises from the Web Sites of www.google.com,www.ask.com,www.msn.com,www.yahoo.com.

LIMITATIONS OF STUDY:

10

On the basis of convenience the respondents are selected. Therefore the sample size is small.

The study is conducted in APRIL-MAY(2010) and hence all the facts correspond to this period

The study is constrain to the time limitation.

SCOPE OF STUDY:

The Geographical Scope. The Chronological scope.

11

GEOGRAPHICAL SCOPE OF KG

BASIN GASCOMPENSATION TO RESOURCE BEARING

STATES RELATED TO PETROLEUM & NATURAL GAS

Minerals constitute an important source of Revenue to the Resource bearing state.

Presently, State Governments are getting royalty on the minerals which are extracted within the State.

However, there is no provision for the states to raise additional revenue through levy of taxes or cess on royalty.

Under the existing provisions under M&M (DR) Act 1957, the revenue derived on all minerals goes to state Government except in respect of Oil & Natural Gas from the offshore areas.

In fact, the State Governments were regularly imposing taxes on royalty until 1991, when Hon’ble Supreme Court struck down this practice on the ground that the states have no legislative competence for levying taxes on royalties on the ground that the M&M (DR) Act 1957 is a Central legislation.

Suitable amendments need to be made to the M&M (DR) Act to enable the State Governments to levy taxes on royalties.

12

Secondly, various public and private companies have been drilling and extracting petroleum crude as well as natural gas in the Krishna-Godavari basin-both onshore and offshore under New Exploration Licensing Policy (NELP).

At present the State Governments are getting royalty only from on-shore petroleum crude and natural gas.

In addition to royalty, oil development cess is also levied and collected as a percentage on royalty on petroleum crude and natural gas.

While the royalty on onshore crude and gas production comes to State Government, the proceeds of oil development cess is passed into Oil Industries Development Board (OIDB) through budgetary mechanism of Government of India.

While OIDB sanctions funds for both development of oil fields and oil industry and also for development of infrastructure in the oil bearing areas.

But, still no definite or precise share out of this income from cess is made available to the state, which has to bear the burden of oil exploration and development.

It is suggested that at least 50 % of the proceeds derived from the cess on oil development should be made available to the concerned state Governments.

Similarly, the entire crude and other incomes derived from offshore petroleum crude and natural gas are credited to Government of India account.

No part of the income from royalty on offshore petroleum produce is given to the State Governments.

Strictly speaking, no offshore well can be exploited without using the ground facilities on the coast.

There it is not justified to appropriate the entire royalty income from offshore petroleum crude and natural gas to GoI, denying a legitimate share to the concerned state Governments.

13

The State Governments have to meet the specified needs of infrastructure, environment and socio-economic development of the local people through allocation of royalty from oil and gas exploitation.

Further, the state must be given right on royalty on offshore oil and natural gas, depending on the proximity of the area to the nearby state.

Therefore suggested that at least 50% of the royalty and other levies raised from offshore petroleum crude and natural gas also be made available to the respective State Governments.

Government of India to concede at least 50% of the free gas to which it entitled under production sharing agreement to the State Government without resorting to the legal technicalities of whether the resource is found on-shore or off-shore as per the spirit of the recommendations of 12th Finance Commission.

Profit sharing & ceiling:

Oil production companies are getting huge profits on dispatch of oil & natural gas but no profit is pass on to the resource state.

Certain portion of profits on Oil & Natural Gas shall be allowed to share with the State Governments.

Profit sharing may be in terms of free Gas to the states from the production sharing arrangements.

If necessary maximum profit sealing may be defined under the profit sharing policy.

14

Natural Gas Sharing and Distribution Network:

Basic interest of the State is to ensure that adequate gas required in the State is made available at reasonable rates.

No portion of the Gas can go outside the state without first meeting the entire requirement of the State and Local Areas.

GoI to consider and ensure that at least 50% of the gas produced of the Coast of the State is allocated to the local power and other fertilizer sectors.

Gas distribution network in the State/Cities /Local Areas shall be left to the State rather than authorizing the Companies by the Central Government.

NELP & Allotment of Exploration block to State Public Sector Undertakings:

The Hon’ble Chief Minister of Andhra Pradesh has already addressed a letter to the Hon’ble Prime Minister to direct the Ministry of Petroleum to reserve 50% of the NELP blocks for exclusive allocation to the State PSU i.e., APMDC so that the State can also simultaneously involve in oil exploration and meet their demands.

The award of blocks for hydro-carbon Exploration on nomination basis to the state PSUs shall be free from bid evaluation, weightage assigned technical capabilities, financial strength, work programme, fiscal package etc.

15

LOCAL VALUE ADDITION:

Oil & Gas Resource Fund may be constituted under Public-Private Partnerships arrangement to manage revenue sharing between Centre and State.

State should deposit a share of Royalty to the Fund with matching contribution from the Centre for Resource development in the State.

This fund can also be used to plan for future period when the Non-renewable sources of energies like Oil & Gas will be exhausted for the State (Like done in Alaska).

COMPENSATION TO AFFECTED PEOPLE:

It is better to offer good compensation to affected people

In respect of land 3 phase payments are advisable

Phase-I: To pay double the market value since losing of land may be problem beyond compensation.

Phase-II: Once the production starts, the land owners after one year may be compensated by way of paying additional amount equivalent to the amount paid in the first phase.

Phase-III: During the process of successful commercial production, every year the land owner may be paid 25% of the crop value as may be decided by the District Collector.

16

SOCIAL INVOLVEMENT:

Since local people, do not get any benefit out of Exploitation of Oil & Gas, the society at large must feel happy with the developers.

For this by way of allocating at least the reasonable percentage of profit in the range of 5 to 10% be allocated for maintaining high standard schooling, technical education of IIT standards and training facilities to the local women for their self empowerment.

BENEFITS TO LOCAL BODIES:

Similarly, the local bodies must be benefited to the extent of loss caused due to the affect of roads and also environment by way of allowing the State Government to levy CESS on Royalty, which can be apportioned to local bodies.

COMPENSATION TO HEALTH & ENVIRONMENT:

This is another area where local area gets affected. In order to involve the Oil & Gas Exploiting Agencies in local area

development, they must be made to run Mobile Health Clinics of High Standard, supply of potable drinking water duly adopting certain villages in coordination with local authorities.

They must also be fixed targets for a forestation in the area of operation by allocating at least thrice of the land occupied by them.

17

IN RESPECT OF NOTIFIED TRIBAL AREAS:

The SAMATHA judgment envisages allocation of 20% of the profits to the local tribal’s.

This shall be made to be implemented strictly.

18

KRISHNA-GODAVARI BASIN

REGULATION,

PRODUCTION & ROYALTY ON OIL & NATURAL GAS

OIL & NATURAL GAS REGULATION

The Ministry of Petroleum & Natural Gas (MOP&NG), GoI has been regulating the allocation and pricing of gas produced by ONGC and OIL by issuing administrative orders from time to time.

The gas produced by the JVs and by NELP operators is governed by the respective production sharing contracts (PSC) between the Government of India and the producers.

Under the existing policy, 100% Foreign Direct Investment (FDI) is allowed through the FIPB route for both LNG and natural gas is on OGL.

If an entity requires the acquisition of Right of User (ROU) in land, it approaches MOP&NG for the acquisition under the petroleum & Mineral Pipelines (Acquisition of Right of User in Land) Act, 1962 (P&MP Act, 1962).

19

The Onshore production of Oil & Natural Gas and Royalties Collected for the last 6years by the State are given below:-

PRODUCTION ROYALTY COLLECTED IN CRORES

YEAR OIL(LAKH MT)

GAS(IN

MM3)

OIL GAS TOTAL

1999-2000 1.36 1333 9.11 25.11 34.222000-2001 2.62 1500 11.00 30.00 41.002001-2002 2.96 1731 23.96 33.56 57.522002-2003 2.81 1963 20.78 31.13 51.912003-2004 3.06 1867 48.67 36.93 85.602004-2005 2.13 1657 55.00 28.00 83.002005-2006 3.61 1625 63.43 41.75 105.182006-2007 2.14 1506 73.40 43.69 117.092007-2008 2.43 1536 90.89 39.54 130.43

EXPLORATION OF OIL & NATURAL GAS RESERVES:

Oil and Natural Gas is categorized as a Major Mineral. The grant of leases for Oil and Natural Gas Rules 1959 framed under

Oil Fields Regulation and Development Act 1948. Under the above provisions of rules presently 22 Exploratory Licenses

have been granted to ONGC.

1. kaikalur-3

2. Lingala

3. Mori-1

4. Mori-5

5. Tatipaka-PSP

20

6. Enugupalli

7. Razole 1&2

8. Elamanchalli

9. Adv-Ponnamanda

10. Endamuru

11. Parsalapudi 8&9

12. Mandapeta

13. Penumandam

14. Kesanapalli

15. Medapadu

16. Vadali

17. Nandigama

18. Srikatipalli, GMAA & PSP-21

19. Lakshmaneswaram-1

20. kesavadasupalem-1

21. Lingala extn & kaikaluru

22. Suryaraopet

NEW EXPLORATION LICENSING POLICY (NELP):

India self-sufficiency is declining to 30% on Oil & Natural Gas reserves.

Since vast amount of Oil investment is required for exploration of Oil & Natural Gas reserve, Government felt the need to attract prevailing

21

National Oil Companies as well as private sector oil companies to invest in this critical area.

With the above background NELP was formulated by Government in the year 1997-98

Under this scheme Director General of Hydro Carbon have already conducted bids for different blocks in 1st, to 7th rounds of NELP.

Under NELP 1 to 7 Counts between 2000-2008 so far 222 blocks are awarded covering an area approximately 41.74 lakh sq.km through out Indian Territory which includes onshore and offshore projects.

All the blocks awarded by Private participation are mostly off shore blocks

PRESENT STATUS IN ANDHRA PRADESH:

On 19-01-2006 APMDC brought to the notice of Hon’ble CM about the participation in Oil Exploration.

Hon’ble C.M. agreed to the said proposal and directed to identify Oil Exploration Companies.

Accordingly VC&MD, collected data by personality visiting the office of Directorate General of Hydro Carbons (DGH), New Delhi.

The following is the list of companies operating in India under NELP:

1. Bharat Petroleum Corporation Ltd (BPCL)

2. Cairn Energy India Pty Ltd (CEIL), UK

3. ENI, Italy

4. Energy Equity India Petroleum Pty. Ltd (EEIPL)

5. Gas Authority of India Ltd (GAIL)

6. Gujarat State Petroleum Corp. Ltd (GSPCL)

22

7. Geo Global Resources, Canad

8. Hardy Expl & Prod (India) Inc (HEPI), UK

9. Hindustan Oil Exploration Company Ltd (HOEC)

10. Hindustan Petroleum Corp. Ltd (HPCL)’

11. Indian Oil Corporation Ltd (IOCL)

12. Jubilant Enpro Pvt Ltd (JEPL)

13. Mosbacher India LLC (MIL), UK

14. Niko Resources Ltd, (NIKO), Canada

15. Oil & Natural Gas Corp. Ltd (ONGC)

16. Oil India Ltd (OIL)

17. OAO GAZPROM, Russia

18. Prize Petroleum Company Ltd (PPCL)

19. Phoenix Overseas Ltd

20. Reliance Industries Ltd (RIL)

PRESENT STATUS IN ANDHRA PRADESH:

The APMDC also collected other information for participation in the Bids.

APMDC addressed the Government of AP for amendments to objects clause of memorandum of association of APMDC on 22.04.06, permission of orders of Government are awaited.

23

Under NELP VI presently 55 blocks across the country have been notified.

Block No. 10 to 16 falls in KG Basin. All the above 7 blocks are in deep water blocks Out of 55 blocks 24 on deep water 6 on shallow water blocks and 25

Onland blocks.

THE APPROXIMATE AREA OF EACH BLOCK IS INDICATED BELOW:

BLOCK NO

BASIN BLOCK NAME APPROX.AREA(SQ.KM)

10 Krishna-Godavari KG-DWN-2004/1 1195111 Krishna-Godavari KG-DWN-2004/2 1185112 Krishna-Godavari KG-DWN-2004/3 620513 Krishna-Godavari KG-DWN-2004/4 1190414 Krishna-Godavari KG-DWN-2004/5 1192215 Krishna-Godavari KG-DWN-2004/6 1090716 Krishna-Godavari KG-DWN-2004/7 11856

THERE ARE TWO ON LAND BLOCKS AS INDICATED BELOW FALLING IN FOLLOWING DISTRICS:

BASIN BLOCK NAME

APPROX.AREA(SQ.KM)

OFF SHORE /STATE

Krishna-Godavari

KG-ONN-2004/1

549 East Godavari(AP)

And Yanam(UT)Krishna-Godavari

KG-ONN-2004/2

1140 West Godavari and Krishna(AP)

24

NEED FOR PRIORITIES:

Considering the availability of the Oil and Natural Gas in K.G. Basin in Andhra Pradesh and there is need for participation by Andhra Pradesh owned Public Sector Corporation (APMDC Ltd).

Some private companies are working under the Joint Venture with ONGC.

Similarly Government of Andhra Pradesh can also have tie-up with private oil explorers.

25

CHRONOLOGICAL SCOPE OF “KG BASIN GAS”

Following is the chronology of events surrounding the dispute over gas from the Krishna-Godavari basin between the Anil Ambani group and his elder brother Mukesh Ambani-led Reliance Industries:

February 1999: A consortium led by Reliance Industries emerges winner of the global auction for an exploration block in the basin, called KG-DWN-98-3, or the KGD6

March 2000: The name of the contractor changed from Reliance Platforms Communications to Global Fuel Management Services and then to Reliance Natural Resources

April 2000: Reliance Industries and the government execute production sharing contract

October 2002: Significant discovery of gas reserves announced from KG-D6

September 2003-May 2004: Reliance Industries submits bids for supply of gas to state-run NTPC

April 2004: Production sharing contract executed and tabled in parliament June 2004: Reliance Industries signs pact with Uttar Pradesh for world’s

largest gas-based power plant with a capacity of 3,500 MW at Dadri near Delhi

June-July 2004: Reliance Industries selected and letter of intent issued by NTPC

June 2005: Memorandum of understanding to reorganise Reliance Industries signed between Ambani brothers. Anil resigns as joint managing director

August 2005: Brothers sign non-compete pact. Reliance Industries board approves scheme of de-merger

September-October 2005: Application filed with Bombay High Court for scheme of de-merger. Shareholders approve scheme

December 2005: Court sanctions de-merger. Financial services, telecom and power businesses transferred to Anil group. Mukesh keeps other businesses

Jan 10, 2006: RIL board approves the draft GSMA to be signed with Reliance Natural Resources

Jan 12, 2006: The board of directors of Reliance Industries approves pact that calls for 28 million units of gas to be supplied to Anil Ambani group and up to 40 million units if the contract with NTPC does not materialize

February 2006: The board of Reliance Natural Resources reconstituted and alleges deviations in the original agreement

26

February-July 2006: Reliance Natural seeks permission from oil ministry to lay pipelines for transporting gas from Kakinada in Andhra Pradesh to Dadri. Reliance Industries asks ministry to approve gas price at $2.34 per unit based on bids called by NTPC. But permission denied

Nov 8, 2006: Reliance Natural takes the dispute to court. Later, company wants Reliance Industries to be restrained from selling 28 million units of gas to any third party. Also wants similar sanction for 12 million units if NTPC contract does not materialise

May 3, 2007: Court allows Reliance Industries to sell gas in the interim, subject to its final order

June 2007: Reliance Industries invites quotations from power and fertilizer companies to facilitate the fixing the price of gas as per market conditions

June 9, 2007: Reliance Natural writes to oil ministry suggesting court order prevented it from granting approval to the price as was being sought by Reliance Industries

June 19, 2007: Reliance Natural seeks further restraining order against Reliance Industries in respect of the balance of the 40 million units of gas

August 2007: Reliance Industries invites bids for price and quantity for sale of KGD6 gas and asks oil ministry to approve sale at $4.32 per unit

September 2007: Ministerial panel approves gas price formula at $4.21 per unit

October 2007: Government sets gas distribution priorities with first preference to existing fertilizer, cooking gas, and steel units, as also new power plants like the Dadri project

May 2008: Empowered group of ministers approves a gas utilization policy Jan 30, 2009: Hearings conclude. Interim order passed allowing Reliance

Industries to execute sale to various customers for five years in accordance with government policy

March 2009: Oil ministry finalizes gas allocation from KGD6 for fertilizer and power companies

June 15, 2009: Division bench upholds the Ambani family gas agreement and directs Reliance Industries and Reliance Natural to enter into a gas supply pact within a month

June 19, 2009: Reliance Natural files caveat in apex court on gas price issue after Bombay High Court order upholds its position on the gas price in its dispute with Reliance Industries

June 23, 2009: Reliance Natural invites Reliance Industries for talks on high court judgments, but Reliance Industries says it is studying the implication

27

July 1, 2009: Reliance Industries says it will appeal to the Supreme Court against high court ruling. Says supplies to Reliance Industries not possible at $2.34 per unit, as it is bound by government price of $4.20 per unit

July 3, 2009: Reliance Natural moves Supreme Court to make gas supply from KGD6 binding on Reliance Industries

July 4, 2009: Reliance Industries moves apex court challenging high court orders saying the verdict erred in deciding the three terms - quantity, tenure and price of gas supply

July 5, 2009: Reliance Industries makes government a party in its petition July 7, 2009: Apex court issues notice to Reliance Industries, Reliance

Natural Resources and the government on cross-appeals July 17, 2009: Government asks court to make it a respondent July 18, 2009: The government files a petition wanting Ambani family pact

that deals with gas supplies to be declared null and void July 19, 2009: Government says gas is its property July 20, 2009: Supreme

Court calls for counter-replies and fixes Sep 1 as date of hearing July 22, 2009: Prime Minister’s Office wants oil ministry to explain why it

has been accused by Anil Ambani group of siding with Reliance Industries over gas dispute

July 28-Aug 3, 2009: Anil Ambani lashes out at oil ministry for allegedly favouring his elder brother. Matter also rocks parliament, where Samajwadi Party leader Mulayam Singh Yadav demands resignation of Petroleum Minister Murli Deora. But Deora says gas does not belong to either Mukesh or Ambani, but the government.

Aug 4, 2009: Oil regulator rejects Anil Ambani group’s charges of acts of omission and commission in allowing capital expenditure of KGD6 gas to be hiked from $2.4 billion to $8.8 billion.

Aug 28, 2009: Reliance Industries says NTPC was told gas price of $2.34 was subject to government approval. Apex court lists hearing for Oct 20

Sep 14, 2009: Reliance Natural accuses Reliance Industries of charging illegal marketing margins

Sep 15, 2009: Anil Ambani Group asks apex Court to make NTPC a party to dispute

Sep 24, 2009: NTPC signs pact with Reliance Industries to buy a part of natural gas, other than the quantity under dispute, at $4.20 per unit.

Oct 5, 2009: Reliance Industries says chairman Mukesh had signed pact on natural gas with Anil Ambani Group in personal capacity without approval from other board members

Oct 9, 2009: Anil Ambani threatens to sue oil regulator saying he made false allegations against his group

28

Oct 11, 2009: Anil Ambani says two brothers can still sit across the table and resolve matters amicably, but Reliance Industries says only court can settle matters now

29

CHAPTER-II

PROFILE OF KG BASIN

30

ABOUT KG BASIN

The Krishna-Godavari basin has been a potential zone for extraction of oil and gas for a long time. The ONGC started exploration for oil and gas in the KG Basin in April 1977, and drilled its first well near Narasapuram in 1978, and discovered gas.As part of exploration for oil and gas, the ONGC has drilled 622 wells, including 483 on land, and 136 offshore. At present 55 oil wells including 34 on land, 21 offshore and 176 gas wells, including 151 on land, and 25 offshore are in operation in the KG basin. Its onshore oil production witnessed a gradual change over the period, from 0.207 million metric tonnes in 2005-06, to 0.284 million metric tonnes in 2008-09. ONGC has set up a mini-refinery at Tatipaka to distil crude oil into naphtha, high-speed diesel, superior kerosene oil and low sulphur high stock. It has rigs at Penikilpadu, South Mahadevapatnam, Kalla, Kesudaspalem, Malapuram and at Vadali. Its installations are set up in an approximately 72 sq km spread in the KG basin. Currently, the ONGC produces 840 tonnes of oil and 44 lakh cubic metres of gas daily. RIL started its production of crude oil at the KG-D6 block of the KG basin in 2008 with a production of 5,000 barrels a day. They are targetting peak hydrocarbon production of 5, 50,000 barrels in a few years. The block is located in the Bay of Bengal, 50 km off the Kakinada coast, at a depth of 8,000 ft.

KG BASIN GAS ISSUE:

The Natural Gas available in the K-G Basin has the potential to substantially improve the economic fortunes of Andhra Pradesh, in the same way as North Sea Gas had done to UK and nearer home in Gujarat. New gas finds in the K-G basin are being reported almost at regular intervals in the last five to six years. Although exact quantity of gas availability in K-G Basin is not yet known, the reserves that have been confirmed so far by the Director General, Hydro Carbons are in themselves very substantial.

The basic interest of Andhra Pradesh should be to ensure that adequate gas required in the state is made available at reasonable rates. This therefore means that no portion of the gas from the K-G Basin can go outside the state without first meeting the entire requirements of the state, namely, power generation, CNG, Domestic, Gas and Industrial.

31

As things stand today, in the near future, there will be only four producers of Natural Gas in K-G Basin.

These are

1. Reliance Industries Limited (RIL)2. Gujarat State Petroleum Corporation (GSPC)3. ONGC and4. M/s.Cairns Energy

The natural gas available from K-G Basin is essentially a methane-rich gas and can be used for power generation, as substitute for LPG for domestic gas supply, as substitute for diesel and petrol in the form of CNG for automobiles and as feed-stock for manufacture of urea.Andhra Pradesh needs the natural gas for all these purposes and it is estimated that the gas requirement in our state will be around 83.27 million cu.m per day by the year 2010.The real demand for natural gas however depends on its pricing, coverage and reach of the pipeline network to all parts of the State.

The KG Basin Story:

India has been poorly bestowed with natural energy resources, especially hydrocarbons. Over 85 per cent of the oil consumed in the country currently is imported. And with the economy growing rapidly, India’s energy demand is also growing exponentially.

That is what makes the Krishna-Godavari basin so significant. In 2002, Reliance Industries discovered huge reserves of natural gas — and some small reserves of crude oil — in a block called D6. Since then, more gas has been struck in this basin. In 2005, the Gujarat State Petroleum Corporation also discovered an estimated 20 trillion cubic feet of gas reserves in another block nearby. The Oil and Natural Gas Corporation (ONGC) and Reliance found more gas in other fields in the KG basin shortly after that.

32

While natural gas is not a perfect substitute for crude oil, it is turning out to be an immensely important and clean energy source for all sorts of industries. Reliance started pumping out gas from its D6 field almost exactly a year ago, dramatically increasing the availability of gas from domestic sources.

The significance of the KG basin discoveries to Reliance Industries’ topline and bottom line is equally important. Even with current production, the KG basin gas contributes to over 10 per cent of its topline and over 30 per cent to its EBIT (earnings before interest and taxes). When the gas fields go into full production mode, it could be Reliance’s single-biggest business — far bigger than even its refining business.

Of course, the KG basin story has not been without its share of controversy. Currently, Reliance Industries is embroiled in a bitter gas pricing dispute with Reliance Natural Resources, owned by Anil Ambani. That dispute has reached India’s apex court, which is expected to pronounce judgement on it anytime now.

Whatever the final outcome of that dispute, it is impossible not to be awed by the sheer scope of the KG Basin gas projects — from the deep sea engineering challenges that needed to be surmounted before the gas could be mined, to the way it will change the country’s energy landscape. A few weeks before the first anniversary of Reliance’s KG basin gas production, a BW team travelled to the offshore platform in KG basin.

33

NATURAL GAS FROM KRISHNA GODAVARI (KG) BASIN:

IN normal circumstances in the pre-reform or pre-globalisation era, such a question would not have arisen at all in India. By virtue of Article 297 of the Constitution of India, all petroleum reserves, including gas reserves in their natural state in the territorial waters or the continental shelf or the exclusive economic zone of India vest in the Union of India and are held for the purposes of the Union. The government is therefore the sovereign owner of KG basin gas for distribution of gas for public good viz fertilizer production, power generation, transport, industry, domestic use etc. That being the case, why does the government of India – after 59 years of the adoption of our Constitution – need to reasserts its ownership of KG gas today in July 2009? Has its sovereign ownership been challenged by any foreign country? No. In an affidavit filed in the Supreme Court on July 18, 2009, the sovereign

34

Bharat sarkar pleads that by a privately negotiated settlement vide an MoU dated June 18, 2005 between CMD, Reliance Industries Limited (RIL) and CMD, Reliance Natural Resources Limited (RNRL), KG basin gas, whose ownership vests with Union of India, has been used as private property. Bharat sarkar now pleads the court to annul the MoU.

Before economic reforms were initiated in the early nineties, ONGC and Oil India Ltd were the only gas exploration and production companies, owned by the government of India. The distribution and marketing of gas was being carried out by the Gas Authority of India Ltd (GAIL), another PSU formed in 1984 with the specific task of forming a national gas grid for gas distribution in the country to ensure regional balance. As a part of reform process, the government decided to invite private investment for exploration and production of oil and gas. New Exploration and Licensing Policy (NELP) was notified in 1999 to award oil/gas blocks to private companies as contractors. In this process a Production Sharing Contract (PSC) was executed in April 2000 between the government of India and undivided RIL and its minor (10 per cent) partner NIKO Resources Limited for production of gas in an area of 339.41 square kilometer in KG basin (D6 field). After the dispute between the two siblings, Reliance Industries Ltd (RIL) was demerged into two companies viz RIL and Reliance Natural Resources Ltd (RNRL), which went to the younger sibling. The MoU of June 2005, which the government of India is now asking to be nullified, stipulated that the gas produced from KG basin as per PSC will be utilized as follows:Quantity of 12 million metric standard cubic metres of gas per day (mmscmd) will be given to NTPC.The next 28 mmscmd would go to RNRL.The rest will be supplied in 60:40 ratio with 60 per cent to RIL and 40 per cent to RNRL.The pricing of the gas was stipulated at 2.34 dollar/mmbtu (million British thermal unit)The above MoU inter alia ignored the sovereign ownership of the government over KG gas on two major parameters viz allocation of gas and the pricing of the same. The government now admits in its Special Leave Petition (SLP) before the Supreme Court in its affidavit in July 2009 that rights of Union of India have been infringed for the following reasons:That RIL and RNRL cannot settle between themselves as to how the gas,

35

which is a national asset and a natural resource that vests in the government of India and which is to be utilized for the wider and larger interest of the nation, is to be distributed. It is not the private property of RIL and RNRL and any understanding arrived at between them is not binding upon the government of India.

The gas has to be distributed in terms of the government-approved Gas Utilisation Policy and at a price approved by the government.

Study on KG Basin : A Central committee has asked the Environment Ministry to take into consideration likely threat of land subsidence in Krishna-Godavari Basin in Andhra Pradesh while giving clearance to any underground oil or gas exploration project in future.

Though it said it did not find any direct evidence to indicate any land subsidence in the gas field or the adjoining areas in the KG Basin, there is a need to conduct an extensive study by institutes like Indian School of Mines on present state and likelihood of such a situation in the region.

The five-member team headed by R K Garg, a scientist of Bhabha Atomic Research Centre (BARC), was set up by the Environment Ministry following an Andhra Pradesh High Court order in June to conduct field inspection to find whether there is any possibility of land subsidence due to exploration of natural gas in the basin.

The court was hearing a petition filed by the Krishna Godavari Delta Parirakshana Samiti represented by Vijay Bangar Raju and Krishna Rao from West Godavari raising apprehensions that land is sinking due to the over-exploitation of oil and gas in Konaseema region. They had sought the government's intervention in the matter.

The team visited the KG basin, nearby villages as well sites of Oil and Natural Gas Corporation (ONGC) and Reliance Industries Limited, which along with others, are conducting exploration in both offshore and onshore facilities.

In its report submitted to the ministry, the team said that land subsidence was

36

reported and observed in the areas with extensive extraction of underground water, oil and gas or mining in various parts of the world, including India (coal mines).

It also suggested inclusion of "measurement of ground level as baseline data in the Environment Impact Assessment study and conducting periodical monitoring of the level during the operational phase."

In case geological factors indicate likelihood of land subsidence and consequential impacts, remedial measures need to be planned by the project proponent.

Provision of such measures needs to be taken into consideration while evaluating the projects for environmental clearance, the report added.

The team also favoured a study to find out the reasons of underground water getting saline in certain locations.

KG Basin Gas:

HYDERABAD: While expressing satisfaction that the entire present requirement of Andhra Pradesh is being met from the KG basin gas, the Chief Minister said that the priority of the State Government is to see that piped gas reaches every kitchen in Hyderabad and other Municipalities in the first Phase in the State. A meeting of the concerned companies will be held at the earliest to see that an MoU is signed in this regard. The details will be worked out about the cost of infrastructure to be created for piped gas supply in the city and other Municipalities.

The Chief Minister expressed hope that once the infrastructure is created and pipelines laid for gas in the city and CNG stations established, vehicles and small and medium industries can also be supplied the gas at a very reasonable price. This will not only reduce the prices of gas by 40% and also pollution in the city. The Chief Minister also saw a presentation on Indian gas market--current consumption and supply. The RIL is presently supplying 10 million metric standard cubic metre per day (mmscmd) for projects in Andhra Pradesh which is the present requirement.

37

The Chief Minister also reiterated that the State will fight for its reasonable share of gas to be produced in future and also for its share of royalties. He said the he will make sure that the State also will gets the remaining 2.21 mmscmd duly allotted to it.

The Chief Minister was informed that as per Article 297 of the Constitution of India, all lands, minerals and other things of value underlying the ocean within the territorial waters or the continental shelf of India vest in the Union Government.  In view of this, the natural gas occurring in K-G Basin in the Bay of Bengal, off the coast of Andhra Pradesh belongs to Government of India. This is the case with Bombay High, North Basin and South Basin gas as well which is presently meeting 70% of India’s gas requirement through HBJ pipeline, now extended up to New Delhi.

The Government of India, with a view to utilizing the said resource, has come up with New Exploration Licensing Policy (NELP), whereby the exploration and exploitation of the natural gas have been thrown open to the private corporate sector also. As part of this, through an International Competitive Bidding process, Reliance Industries Limited (RIL), ONGC, Cairns Energy and Gujarat State Petrochemical Corporation were awarded various blocks in K-G Basin. Of the above four contractors, only RIL has recently commercialized the natural gas.  The RIL was initially contending that they have the right to sell the gas to any customer on the market discovered price.

The natural gas in KG basin is capable of substituting Naphtha for the production of Urea; it is capable of power generation; it is capable of substituting petrol and diesel as CNG; it is capable of substituting LPG for domestic gas and it is also capable of substituting furnace oil for industrial use. Thus, it has a wide range of applications and only an impartial prioritization of gas allocation on some rational basis by an independent agency like the Government of India can serve long term national interest of the people of the Country.

In view of the above, the Government of India have constituted Empowered Group of Ministers (EGOM) for prioritization of gas allocation and fixing the price of natural gas under the Chairmanship of the then Union Minister for External Affairs, Pranab Mukherjee. The other Members are the Union Ministers for Petroleum, Power, Fertilisers, Finance, Law, Justice & Company Affairs and Deputy Chairman of the Planning Commission of India.

38

The EGoM on natural gas at their meeting held on 28th May 08 decided that the first supplies of natural gas from the KG Basin should go to meeting the requirements of natural gas of existing stranded power and fertilizer projects and balance, if any, should be allocated to City gas distribution and new power and fertilizer projects. The EGoM on Natural gas, at their meeting held on 28th May 2008 made the following prioritization of gas allocation from RIL’s D6 Block in KG Basin out of their proposed first phase production of 40 mmscmd of gas: 14 mmscmd to existing fertilizer units, 18 mmscmd to existing power Projects, 3 mmscmd to LPG Extraction Plants and 5 mmscmd to CGD projects.

The EGOM further decided that the price of the natural gas shall be $ 4.3 per million BTU for all classes of consumers. Thus, it is the Government of India that has decided both the prioritization of gas supply and the price, reducing the role of RIL only for production and supply of gas. As a result, the RIL does not have any say either in allocation or in price fixation. Interestingly, no portion of the gas that is presently being produced is utilized by RIL.

The RIL has started supplying gas from the first week of April, 2009 beginning with      5 mmscmd. As on 1st August, 2009, their production has reached 31mmscmd. Out of this, the RIL is supplying 10 mmscmd of gas to projects in Andhra Pradesh, 5 mmscmd of gas to projects in Maharashtra, 7 mmscmd for projects on the HBJ pipeline and 8 mmscmd for projects in Gujarat. Incidentally, the entire requirement in respect of all the existing gas based projects in the State is fully met by supplies from RIL. It is estimated that RIL will reach the targeted production level of 40 mmscmd by 30th September, 2009. The RIL will eventually produce 80 mmscmd by September, 2010. No body is quite sure as to when other contractors like ONGC, CAIRNS and GSPC will start production from the wells allocated to them. It may take atleast four years from now for commercialization. 

In Andhra Pradesh, gas-based power projects for a capacity of 2799 MW were promoted on the assurance of gas supply given by ONGC/GAIL during the period 1994-2003. Nagarjuna Fertilizers & Chemicals Limited has also come up on the basis of similar gas assurance. The total requirement of gas in the State in respect of the existing projects is 16 mmscmd, as against which, GAIL was supplying only 6 mmscmd, leaving a gap of 10 mmscmd. As a result, the power projects were operating at 30% PLF only and Nagarjuna was operating at only 60% capacity utilization. The EGOM allotted 7.79 mmscmd of gas from RIL’s first phase production as against a requirement of 10 mmscmd. As there is a provision for utilizing the unutilized portion of the gas allocated, the RIL is supplying the entire requirement of 10 mmscmd in the State in respect of our existing power and

39

fertilizer projects. Because of this, the power situation in the State has vastly improved, as all the gas-based power projects are operating at their full capacity for the first time since their implementation.

The APGENCO has already initiated steps for promotion of 2100 MW of gas-based power project in Karimnagar district. This approximately requires 8.5 mmscmd of gas, for which the RIL has already issued a firm gas supply letter in 2007. In view of the changed circumstances, this however needs the approval of EGoM. The APGENCO is following up this matter. The EGOM will soon start allocation of gas for new projects after ensuring that the requirements of all the existing gas based projects are fully met.

The Government of Andhra Pradesh is committed to utilizing the gas available in the   K-G Basin for promotion of industries and for City Gas Distribution in the State which includes CNG and piped gas as substitutes for LPG. Now that there is certainty of availability of gas from KG basin in the long run on a sustainable basis, the Krishna Godavari Gas Network Limited and the Bhagyanagar Gas Ltd have been directed by the Chief Minister for taking up CGD network creation in the State. The State Government is also proposing to approach the Petroleum Regulatory Board to grant the permission for CGD to KGGNL and Bhagyanagar on nomination basis. As regards participation by the State Government in gas exploration, it has been decided to go by the expert advice of DG, Hydrocarbons of Government of India:

40

EXPLORATION FOCUS:

Survey area :

India's deepwater Krishna-Godavari basin is emerging as one the world's hottest oil and gas exploration areas. The basin's huge potential is demonstrated by Reliance Industries' 19 discoveries since 2000. The Indian government's New Exploration Licence Policy (NELP) has liberalised India's upstream industry, and is successfully attracting foreign and private investment. NELP Round VII, launched in December 2007, has three shallow water and three deepwater blocks on off er in the Krishna-Godavari basin.  EMGS has recently acquired an electromagnetic

41

(EM) scanning survey of one of the deepwater blocks, KG-DWN-2005/3, and data from this survey are now available.

42

CHAPTER-III

DISCOVERY OF KG BASIN

DISCOVERY:

Krishna-Godavari (KG) Basin, on the east coast of India (Figure 1), encompasses a sedimentary cover of approximately 100,000 km2 both onshore and offshore. The basin has emerged as a frontier area due to the discovery of a multitrillion cubic feet super giant gas field (Bastia et al., 2004).

Figure-1

Krishna-Godavari basin is a peri-cratonic passive margin basin in India. It is spread across more than 50,000 square kilometers[1] in the Krishna River and Godavari River basins in Andra Pradesh. The site is known for the D-6 block where Reliance Industries discovered the biggest natural gas reserves in India in 2002. It was also the world's largest gas discovery of 2002.At Matsyapuri , men in orange overalls indulge in a different kind of fishing. at this particular location in Andhra Pradesh, these men are scouting for hydrocarbons.About 16 km from Naraspur, Matsyapuri is a part of the Krishna-Godavari basin (KG basin), one of the first sites explored by the Oil and Natural Gas Commission (ONGC) of India. The basin spans the

43

coastal districts of East Godavari, West Godavari and Krishna in Andhra Pradesh. It extends over 28000 sq km onshore, 24000 sq km in shallow waters and 18000 sq km in deep waters.The journey of exploration began in April 1977 when ONGC began prospecting for oil and gas in the basin. In 1978, it drilled its first well near Naraspur and discovered gas there. Since then, it has struck black gold time and again in the rather lucrative basin.The Krishna Godavari basin dispute is an ongoing dispute between Reliance Industries (RIL) and Reliance Natural Resources (RNRL) over the pricing of natural gas found in the Krishna Godavari basin. The dispute was widely covered by the media due to its acrimonious nature, with the Supreme court of India comparing it to a 'fight between two countries'[1]Around 7 trillion cubic feet of natural gas was discovered by Reliance in the Krishna Godavari basin in October 2002. In 2005 the Reliance Group was split between Anil Ambani and Mukesh Ambani with RIL going to Mukesh Ambani and RNRL to Anil Ambani . A family pact was made in 2005 in which RIL was to supply 28 million cubic meters of gas a day at $2.34 per million units to RNRL for 17 years. However, in September 2007, the Indian Government fixed a price of $ 4.2/mBtu. This decision was later reversed by the Bombay High Court, which ordered RIL to supply the gas as per the original agreement.

Reliance Industries created history when natural gas from its deep-sea Krishna Godavari basin fields flowed to surface , a fleet achieved in flat seven years that will transform India's energy landscape.

"Natural gas production from wells started at 1700 hrs and it reached the onland receiving facility at Gadimoga in Kakinada district of Andhra Pradesh,"

a source, in know of the development, said.

It took 13-14 hours for the gas to travel from the sea-bed to the onshore facility. "The flare (at Gadimoga) lit up at 0920 hours," the source said.

A company spokesperson confirmed start of gas production, but did not give details. "We will be issuing a statement shortly," .

ONGC makes gas discovery in KG Basin: Oil & Natural Gas Corporation has reportedly struck significant gas reserves in the Krishna-Godavari Basin where intense deepwater exploration is underway since 2003.

44

The gas find is reported to be at a depth of 2.45 km in the G-1 location of the basin. Reports indicate the existence of 4 trillion cubic feet of reserves at the site. The discovery has also led one to believe the existence of more gas-bearing structures in the field. ONGC has 12 blocks in the region, and the total gas discoveries could be around 8 trillion cubic feet.

Reliance Industries, it may be recalled, had made a gas discovery of 7-10 trillion cubic feet in the same basin, during November 2002.

Reliance in KG Basin:

In September 2007, India's largest private sector company, Reliance Industries Limited (RIL) announced an oil discovery in the deepwater block KG-DWN-98/1 (KG-D4) located in the Krishna-Godavari basin (KG basin). This block was awarded to RIL, which holds 100% participating interest in it, under NELP-I and spans an area of 8100 sq kms.

There is no doubt about the fact that the Krishna-Godavari basin (KG basin) is hydrocarbon-fertile. Since only about 1/3rd of the total potential for exploration wells has been drilled so far, the basin certainly holds far more gas in its womb than has been discovered so far.

In September 2009, the Directorate General of Hydrocarbons (DGH) said that the gas output from only the fields managed Reliance Industries Ltd. (RIL) could be almost 4 times the levels committed by the company so far.

Currently, RIL has committed 80 million metric standard cubic metres per day (mmscmd) and its current production level is about 36 mmscmd. Hence, if the DGH's calculations are accurate, RIL's output would be about 300 mmscmd ? almost quadruple!

The mammoth implication of these figures lies in its oil equivalence. Totaling about 2 million barrels of oil per day, it wholly covers India's current consumption of oil. Ironically, most of this oil is imported by the country. However, the nation's gas consumption is over and above this expected output.

Yet, if both DGH and RIL confirm this production potential, it would mark the most significant energy development India has ever seen!

45

In September 2007, India's largest private sector company, Reliance Industries Limited (RIL) announced an oil discovery in the deepwater block KG-DWN-98/1 (KG-D4) located in the Krishna-Godavari basin (KG basin). This block was awarded to RIL, which holds 100% participating interest in it, under NELP-I and spans an area of 8100 sq kms.

The find, named 'Dhirubhai ? 36', was the premier oil discovery in the deep-water basin of the area. The well was located in a water depth of 565 meters and was drilled to a target depth of 3595 meters. During the Drill Stem Testing (DST), the well flowed 596 barrels of oil per day.

The famous KG-DWN-98/l (KG-D6) block, where RIL, Reliance Group made the world's largest gas discovery in 2005, spans 8,100 sq. kms. of the Krishna-Godavari basin (KG basin). It lies in the Bay of Bengal on India's east coast.

The first three discoveries (Dhirubhai-1, Dhirubhai-2 and Dhirubhai-3) have expected gas reserves of 8 tcf.

In March 2003, the exploration team discovered Dhirubhai-4, with in-place gas volumes of 1,700 bn standard cubic feet.

In February 2006, RIL encountered the thickest hydrocarbon column so far in its MA-2 well. This column reached a depth of about 3.6 km and penetrated a gross hydrocarbon column of 194m consisting of 170 m of gas and 24 m of oil.

Initial rate of production from the MA field is about 5,000 barrels per day (bpd) and is expected to reach its peak rate of 40,000 bpd by about mid-2010. D1 and D3 are expected to reach 2.8 bcfd within the first year of operation, although there is flexibility to raise this to 4.2bcfd.

Several facts and details about the KG-D6 project of the Reliance Group under the head of an amalgamated Reliance Industries Limited and Reliance Petroleum Limited; which is the root cause of the RIL RNRL gas dispute, currently being battled in the courts.

46

KG Basin: RIL’s Discoveries:

The famous KG-DWN-98/l (KG-D6) block, where Reliance Industries Ltd. (RIL) made the world’s largest gas discovery in 2005, spans 8,100 sq. kms. of the Krishna-Godavari basin (KG basin). It lies in the Bay of Bengal on India’s east coast.

The first three discoveries (Dhirubhai-1, Dhirubhai-2 and Dhirubhai-3) have expected gas reserves of 8 tcf.

In March 2003, the exploration team discovered Dhirubhai-4, with in-place gas volumes of 1,700 bn standard cubic feet.

47

In February 2006, RIL encountered the thickest hydrocarbon column so far in its MA-2 well. This column reached a depth of about 3.6 km and penetrated a gross hydrocarbon column of 194m consisting of 170 m of gas and 24 m of oil.

Initial rate of production from the MA field is about 5,000 barrels per day (bpd) and is expected to reach its peak rate of 40,000 bpd by about mid-2010. D1 and D3 are expected to reach 2.8 bcfd within the first year of operation, although there is flexibility to raise this to 4.2bcfd.

Versions of RIL and RNRL:

During the annual general meeting of RNRL on 29 July 2009, Anil Ambani accused the petroleum ministry of siding with RIL and accused RIL of inflating the capital expenditures and being greedy to earn supernatural profits [6]30 MPs of Left Front asked the government to take over the distribution and marketing of gas from the basin. They also urged the government to reduce the gas price to $2.34/mmbtu.. On 8 August, RIL president Atul Chandra issued a statement which rejected the allegations of Anil Ambani as baseless, tendentious and motivated. Following this, ADAG started publishing advertisements in national media criticizing Reliance and the Petroleum Ministry and claiming that the government will receive only Rs 500 crore from the project. On 21 August, Government of India described the campaign by Anil Ambani as unfortunate and claimed that it is expected to earn Rs 84,000 crore from the project.]

Reliance Industries Limited:

48

(NSE: RELIANCE) is India's largest private sector conglomerate (by market value) , with an annual turnover of US$ 35.9 billion and profit of US$ 4.85 billion for the fiscal year ending in March 2008 making it one of India's private sector Fortune Global 500 companies, being ranked at 206th position (2008). It was founded by the Indian industrialist Dhirubhai Ambani in 1966. Ambani has been a pioneer in introducing financial instruments like fully convertible debentures to the Indian stock markets. Ambani was one of the first entrepreneurs to draw retail investors to the stock markets. Critics allege that the rise of Reliance Industries to the top slot in terms of market capitalization is largely due to Dhirubhai's ability to manipulate the levers of a controlled economy to his advantage. Though the company's oil-related operations form the core of its business, it has diversified its operations in recent years. After severe differences between the founder's two sons, Mukesh Ambani and Anil Ambani, the group was divided between them in 2006. In September 2008, Reliance Industries was the only Indian firm featured in the Forbes's list of "world's 100 most respected companies"

49

Products:

Reliance Industries Limited has a wide range of products from petroleum products, petrochemicals, to garments (under the brand name of Vimal), Reliance Retail has entered into the fresh foods market as Reliance Fresh and launched a new chain called Delight Reliance Retail and NOVA Chemicals have signed a letter of intent to make energy-efficient structures. The primary business of the company is petroleum refining and petrochemicals. It operates a 33 million tonne refinery at Jamnagar in the Indian state of Gujarat. Reliance has also completed a second refinery of 29 million tons at the same site which started operations in December 2008. The company is also involved in oil & gas exploration and production. In 2002, it struck a major find on India's eastern coast in the Krishna Godavari basin. Gas production from this find was started on April 2, 2009. As of the end of 3rd quarter of 2009-2010, gas production from the KG D6 ramped up to 60 MMSCMD.

Reliance's Oil & Gas find:

In 2002, Reliance found natural gas in the Krishna Godavari basin off the coast of Andhra Pradesh near Vishakapatnam. It was the largest discovery of natural gas in world in financial year 2002-2003. On 2 April 2009, Reliance Industries (RIL) commenced natural gas production from its D-6 block in the Krishna-Godavari (KG) basin.

The gas reserve is 7 trillion cubic feet in size. Equivalent to 1.2 billion barrels (165 million tonnes) of crude oil, but only 5 trillion cubic feet are extractable.

On 2008 Oct 8, Anil Ambani's Reliance Natural Resources took Reliance Industries to the Bombay High Court to uphold a memorandum of understanding that said RIL will supply the natural gas at $2.34 per million British thermal units to Anil Ambani.

50

RIL gas flows from KG-D6; India to save $9 bn in oil import:Reliance Industries began gas production from Wednesday, and the output is at 2.5 million cubic metres per day

New Delhi: Billionaire Mukesh Ambani-run Reliance Industries has begun natural gas production from its deep-sea Krishna Godavari basin fields, a history-making feat that will help India save $9 billion in oil imports a year.

RIL took just six-and-half years from discovery to begin gas production from the deep-sea KG-D6 block as against the global practice of 9-10 years, the firm said in a statement.

Dhirubhai-1 and 3, the first two of the 18 gas finds in KG-D6 that have been put to production, will transform the energy landscape by boosting power supply from idle generators starved of fuel and produce cheaper urea for agriculture.

“Natural gas production from wells started and reached the onland receiving facility at Gadimoga near Kakinada in Andhra Pradesh in 2 days. This source in the know of the development said.

It took 13-14 hours for the gas to travel from the sea bed to the onshore facility.

The 15 million cubic metres per day of KG-D6 gas allocation to urea-making plants will help save the country about Rs3,000 crore per annum in fertiliser subsidy. Another 18 mmcmd of gas will go to power plants, with one mmcmd capable of producing 250 megawatt of electricity.

RIL will earn $2 billion in revenues from gas sales in 2009-10.

The company said gas from offshore is being received at its world-class onshore facility at Gadimoga, a small village in the East Godavari district, and delivered to the East West pipeline of Reliance Gas Transportation Infrastructure Ltd.

“Reliance has created history and has once again demonstrated its ability to implement complex projects at par with the best performance benchmarks in the world,” company Chairman and Managing Director Mukesh Ambani said.

The clean energy from the Dhirubhai 1 and 3 discoveries of the KG-D6 block will be a boost for energy security and growth of India,

51

The gas would boost power supply from idle electricity generators starved of fuel and produce cheaper urea for agriculture.

It is a landmark in the history of oil and gas production. (The) world over, this has created a new benchmark for deep-sea developers,.

The $8.835-billion (Rs44,175 crore) project will double domestic natural gas production when the field hits its peak output of 80 million cubic metres per day in 2010.

It will wipe out the fuel deficit at urea-making fertiliser plants and meet half of the 36 mmcmd gas shortfall in power plants. Reliance will produce enough gas to meet about a third of the UK demand.

The gas output will start at 10 mmcmd and rise by the same volume every month to reach 40 mmcmd by July-end.

Each well is capable of producing 5-6 mmcmd gas,.

52

Reliance Natural Resource Limited:

Reliance Natural Resources Limited is a petrochemical company involved in sourcing, supply and transportation of gas, coal and liquid fuels. It is a part of the Reliance Anil Dhirubhai Ambani Group. The company was incorporated on 24 March 2000 and went public on 25 July 2005.

Indian energy major Reliance Industries has found natural gas in four more areas in its field off the country's east coast, two sources with knowledge of the matter said on Friday.

The company, India's largest listed firm with interests including oil and gas exploration, refining, petrochemicals and retail, has informed the Directorate General of Hydrocarbons about the discoveries in the Krishna Godavari (KG) basin, the sources said.

Reliance, controlled by billionaire Mukesh Ambani, has sought permission from the regulator to further develop the fields, said the sources, who declined to be named as they were not authorised to speak with the media.

Reliance is unable to hit peak gas production at its D6 block in the KG basin due to customers not buying allocated volumes and a lack of pipeline infrastructure, Executive Director P.M.S. Prasad said on Tuesday.

53

The company is producing 63-64 million standard cubic metres a day (mmscmd) of gas from the block, he said. Gas output was slated to reach a peak of 80 mmscmd by April.

Details about potential reserves in the new finds were not immediately available.

In April last year, Reliance started pumping gas from its find in the KG basin. The find, India's largest, is expected to almost double the energy-hungry nation's output when production peaks to 80 mmscmd.

Reliance shares closed up 1.8 percent on Friday, while the Mumbai market rose 1.2 percent.

KG BASIN GAS TO REACH JAMNAGAR REFINERY:

The 450-km Bharuch-Jamnagar gas pipeline in Gujarat is now fully commissioned, paving the way for Reliance Industries' KG basin gas to reach the group's Jamnagar mega refinery and petrochemical complex in the western state. Gas production from the prolific basin on the east coast, offshore Bay of Bengal,began,recently.

The last 110-km section of the pipeline, between Rajkot to Jamnagar, was commissioned on March 25. The contract was executed by a consortium of Maytas Infra Ltd and Ukranian gas pipeline major Naftogazbud. The Bharuch-Jamnagar pipeline will be managed by Gujarat State Petronet Ltd, a subsidiary of state government-owned Gujarat State Petroleum

Corporation Ltd.

Discussing the situation with Projectmonitor, a senior GSPL official said that gas from the KG basin will be transported up to Bhadbhut in Bharuch by the 1,440-km East-West pipeline of Reliance Gas Transportation Infrastructure Ltd, a subsidiary

54

of Mukesh Ambani-controlled Reliance Industries Ltd. From there, gas supplies will be managed by GSPL's Gujarat gas grid. Reliance's East-West pipeline, it is reliably learnt, was test-fired recently.

India's longest, the 48-in diameter East-West pipeline originates at Oduru near Kakinada in Andhra Pradesh, which is the site of the KG basin gas discovery, and reaches Gujarat traversing Maharashtra. It will be also be hooked up to Gas (India)'s national gas grid in each of the three states. The East-West pipeline would be connected with Hazira-Vijaipur-Jagdishpur and Dahej-Vijaipur pipeline network at Ankot in Gujarat, Dahej-Uran and Dabhol-Panel pipeline network at Mashkal in Maharashtra and Krishna Godavari basin pipeline network at oduru in AndhraPradesh.

GSPL's Bharuch-Jamnagar pipeline has significantly boosted the Gujarat gas grid network. Gujarat has planned to set up a state gas grid network of 2,200 km, out of which around 1,400 km is now operational, the GSPC official said. Among the several pipelines under construction within Gujarat is the 190-km pipeline that would transport gas from Bhadbhut in Bharuch (the Gujarat extremity of Reliance's East-West pipeline) to Gana (Anand district), passing through Hadala (in Surendra Nagar district).

Reliance Industries very recently started commercial gas production from its D-6 block in the KG basin (see back page). Initial production will be 15 mmscmd, reaching 40 mmscmd on stabilisation. Peak production is expected to be 80 mmscmd. Last month, pacts were signed for priority gas supplies to urea units.

 

Significant discoveries:

Gujarat State Petroleum Corporation Ltd has also made significant discoveries—including its biggest, Deen Dayal—in the KG basin. By 2011, some 8-10 mmscmd of gas is expected to start flowing on commercial scale, thanks to a $1-billion investment programme currently underway. GSPCL officials said that various

55

onshore facilities are currently under construction. For the gas transportation and distribution network within Andhra Pradesh, the GSPC group has formed a new company, Krishna Godavari Gas Network Ltd, in joint venture with Infrastructure Corporation of Andhra Pradesh and IDFC Private Equity. Gas will also be brought to Gujarat through Reliance East-West pipeline in which GSPC has taken up capacity.  

56

CHAPTER-IV

GOVT INFLUENCE

57

Gas from K-G basin: YSR seeks priority status for State:

Apprises Prime Minister of the Government’s efforts to reduce pollution levels

Reiterating his Government’s commitment to bring down the price of domestic gas cylinder to Rs. 200, Chief Minister Y.S. Rajasekhara Reddy has requested Prime Minister Manmohan Singh to give priority to Andhra Pradesh in the allocation of gas from the Krishna-Godavari basin.

Interacting with the Prime Minister who arrived in Visakhapatnam to commission the indigenously developed nuclear submarine INS Arihant, the Chief Minister explained to him the Government’s efforts to reduce pollution levels by promoting piped gas supply and promote compressed natural gas as an alternative to petrol and diesel.

The Government had drawn up plans to develop the twin cities to international standards involving an estimated Rs. 20,000 crore and it was proposed to set up 1,000 CNG filling stations in this direction.

Recalls letters

He asserted that the Centre should decide the allocation and pricing issues related to K-G basin gas without allowing the decision to fall into the hands of the private sector. Recalling the letters he had addressed to the Centre, he said giving due priority to the State would enable setting up pipeline for supply of gas and bringing down the prices of domestic gas significantly, fulfilling the assurance given to women.

The Government had set up a joint venture firm, Krishna-Godavari Gas Network Limited, and was preparing plans to utilise the existing trunk line between K-G-basin and Hyderabad under the public-private partnership mode.

Government lauded

The Prime Minister, according to an official release, complimented the Government for ensuring that Hyderabad retained its top position as a “business-friendly” city in the recent World Bank study.

When the Chief Minister explained about the plans to develop Visakhapatnam which won acclaim as the “destination city’ and other major infrastructure projects, the Prime Minister wanted the Government to send a detailed report on the projects

58

in the pipeline to the Planning Commission so that the Centre could positively consider them. 

YSR insisted on KG basin gas for AP first :

YSR was initally adamant that natural gas from the Krishan-Godavari (KG) basin operated by Mukesh Ambani-led Reliance Industries Ltd., (RIL), be first distributed in Andhra Pradesh. In fact, YSR had written to the Prime Minister Manmohan Singh to provide at least 10 per cent of the KG basin gas to Andhra Pradesh, being the first landfall point for KG gas and at a preferential price. However, he later conceeded to the fact that distribution of gas is under the preview of the Empowered Group of Ministers (EGoM) formed under the aegis of Ministry of Petroleum and Natural Gas to determine the pricing and supply of gas from the eastcoast offshore KG-D6 block. He also stressed that gas will be allotted to States by the Centre and can't be decided by the 'Ambani brothers'. "The dispute over sharing of gas is not an issue to be settled by their mother (Kokilaben). It is for the Centre to decide who should get the gas and at what price," YSR told reporters in July, 2009. Reddy, not only publicly demanded that Andhra Pradesh, be given a due share of the gas deposits but also set up Andhra Pradesh Gas Infrastructure Corporation to bid for the NELP blocks and foray into gas exploration. Sources said RIL wasn't keen on supplying all the produce to Andhra Pradesh, particularly, to government-run organisations, as they would put tremendous pressure on reducing the tariffs.

The Chairman of Petroleum and Natural Gas Regulatory Board (PNGRB), Mr.L.Man Singh and his team today met the Chief Minister Dr.Y.S.Rajasekhara Reddy at camp office and made a presentation on City Gas Distribution and Natural Gas Pipelines network supply and connected issues in the presence of respective Ministers and senior officials.

The Chairman, wanted the State Government agencies to identify the geographical area around cities in the State which is economically viable to take and distribute the gas.  For this purpose, he wanted the State Government to constitute a committee for identification of the economically viable areas.  The Committee

59

would include the Investment & Infrastructure dept., industries, Municipal Administration etc.This committee will get the top consultants to study these economically viable areas and also ensure that this is taken up on mission mode. The I&I Department will also hold a seminar to promote and motivate the entrepreneurs in which the PNGRB Chairman will also participate within a month.

The Chief Minister told the officials that he will review the progress of the work every month. He said that we should on the forefront and the first to take the KG basin Gas to every kitchen, vehicles as well as Small Scale industries in the State.

The Chief Minister, in principle, agreed to reduce the VAT on Natural Gas sales from the present 12% to 4% on the advise of the PNGRB Chairman so that the people of the state will get the gas at a very reasonable price. Dr.Reddy said we should be proactive to see that the KG basin gas distribution is taken up by the entrepreneurs.  The bidding should begin at the earliest and in five years the KG basin gas should reach every house in the State.

Ministers Kanna Lakshminarayana, Satrucharla Vijayaramaraju; Secretaries Manmohan Singh, Ratna Prabha, RTC MD, Dinesh Reddy, Commissioner, Industries Mr.P.V.Ramesh and other senior officials of Industries etc. were present.

Manmohan must clarify on KG basin gas controversy: CPI

Special Correspondent “Government, Petroleum Ministry should be accountable to the people”

No clarity on the quantum of gas production

“Ministry is fighting against NTPC

on behalf of Reliance”

NEW DELHI: The Communist Party of India demanded Prime Minister Manmohan Singh to clarify the action taken to deal with the “mess” created by the

60

government regarding Krishna-Godavari basin gas, its supply and determination of price of gas and “abnormal” gas concessions to Reliance Industries Limited.

“The Government of India, its Petroleum Ministry, and other Cabinet Ministers should be accountable to the people of India, not to any corporation, however big it is. Hence, the CPI demands clarification from the government on all the issues raised by the public and the media,” the CPI Central Secretariat said in a press release.

It said the statement by Petroleum Minister Murli Deora avoided answering the main questions raised by the people and media and sought response on four issues, including that there was a gap regarding the quantum of gas produced at the KG basin, since the estimates by the Directorate-General of Hydrocarbons, and the statement of the Minister differ. It sought to know how much gas was produced since February till date and whether Reliance slowed down its exploration to wait for immediate usage.

Reliance, the CPI statement said, had, in an international competitive bid, agreed to supply gas at $2.34 a unit which it was not ready to honour and the NTPC (National Thermal Power Corporation) was fighting to getting it implemented.

Petition in Supreme Court :The Petroleum Ministry filed a special leave petition in the Supreme Court intervening in a case between two private players regarding the share of the gas. The petition said that Reliance could not sell gas below $4.2 a unit and this nullified any scope for the NTPC in obtaining gas at the previously agreed rate. “The Ministry is thus fighting against a Navratna public sector undertaking, NTPC, on behalf of Reliance.”

In November 2004, the capital cost of KG D6 project was around Rs.5,400 crore and by the end of 2007, it escalated to Rs.67,000 crore. This, it said, was entirely recoverable from gas sales to three times the capital expenditure, that is, Rs.2,01,000 crore, and any cash share for the government would be paid only after recovery of this entire amount.

It said there was an allegation that two junior officers who were not authorised had agreed to the cost escalation causing a loss of thousands of crore of rupees to the country.

61

Referring to Reliance Gas Transportation Infrastructure Ltd. (RGTIL), it said that this was a subsidiary of Reliance Industries with a value of Rs.30,000 crore that was “transferred to Mukesh Ambani as a personal company for a nominal amount.”

The move deprived profit to the Reliance shareholders against estimated annual earnings of Rs.5,000 crore by the RGTIL.

The party also said that the newly introduced Section 35 AD in the Income Tax Act allowed cent per cent capital expenditure incurred on the setting up and operating of natural gas or crude oil pipeline network as 100 per cent tax deduction in the first year. “As a result, it is alleged that Mr. Mukesh Ambani gets Rs. 20,000 crore,” the release said.

Krishna-Godavari Gas Network revamped:

In a strategic move to ensure quick supply of gas for industrial and other purposes in major cities, the government has restructured the Krishna-Godavari Gas Network Limited (KGGNL), making Reliance Industries Limited (RIL) the biggest stakeholder with 67 per cent equity.

The Gujarat State Petroleum Corporation (GSPC), with which this special purpose vehicle (KGGNL) was originally formed along with the Investment Corporation of Andhra Pradesh (InCAP) and Infrastructure Development Finance Corporation (IDFC) have been retained as partners but their equity has been slashed to 11 per cent each.

Distribution network:

The decision to enlist RIL as the major shareholder was taken at a Cabinet meeting here on Monday following indications that GSPC might not supply gas before till 2012. In contrast, RIL was in a position to ensure supply shortly to Hyderabad, Kakinada, Tirupati, Vijayawada, Visakhapatnam and Rajahmundry and to the entire State later.

62

Briefing reporters, Information Minister A. Ramanarayan Reddy said that RIL had already submitted bids to the Petroleum & Natural Gas Regulatory Board to lay the distribution network in these cities.

335 cr. for Masula port

The Cabinet approved an additional cost of Rs 335 crore for the Rs 1,255-crore Machilipatnam Port Project as the project site was shifted from Gogileru to Machilipatnam (Gilakaladinne) in tune with popular sentiments.It resolved to extend assistance to the developer, Maytas Infra, as a committee of secretaries committee and WAPCOS, consultants, found the extra cost “justifiable”.

Clearance was also given for construction of a “dedicated jetty” at Meghavaram to import coal from Australia/Indonesia for the 2,640-MW thermal power project being set up at Bhavanapadu in Srikakulam district by East Coast Energy Limited. Both L&T Ramboll, consultants, and Director of Ports recommended the jetty.

Hike approved

The Cabinet approved hike in cost of Pranahita-Chevella project by Rs 3,635 crore (Rs 34,865 to Rs 38,500 crore) as this would correspondingly increase the project’s ayacut by 4.2 lakh acres (Rs 12.2 lakh acres to 16.4 lakh acres) in Adilabad, Karimnagar, Medak, Nalgonda, Nizamabad and Ranga Reddy districts.

ONGC Eyes Partners for KG Basin Gas Block ONGC is in talks with several oil majors to replace Statoil and Petrobars following the companies' decisions to pull out of an exploration venture in the KG Basin.

"We are talking to a lot of people," ONGC Chairman and Managing Director R S Sharma said.

Exxon Mobil Corp. is among the companies ONGC is reportedly in talks with, but Sharma refused to divulge details.

63

"We are looking at firms for technology (to produce gas from ultra deep sea) and risk sharing," ONGC Director (Finance) Dinesh K Sarraf said.

State oil and Petro bras, two specialists in deep-sea production technologies, decided to quit block KG-DWN-98/2 due to government delays in approving their participation in the deepwater acreage.

Petroleo Brasileiro SA or Petrobras, Brazil's state-controlled oil firm, has offered ONGC its 15 percent interest in the Krishna Godavari basin block that sits next to Reliance Industries prolific KG-D6 fields without any cost.

Similarly, Statoil has decided against participating in future drilling in the acreage off the Andhra coast.

This follows apparent unwillingness of the Petroleum Ministry and its technical wing DGH to accord approvals for equity participation by foreign companies and the inordinate delays in clearing the drilling programs.

ONGC now wants another foreign partner to share risks in developing the acreage, which is estimated to have an in-place gas reserve of 14 trillion cubic feet.

The state-owned firm does not have the production technology to produce gas from such water depth in the geologically hostile KG basin.

ONGC, a few years back, had bought 90 percent stake in the block from Cairn India. In 2007, it farmed out 15 percent interest in the block to Petrobras and 10 percent to Norsk Hydro (now Statoil).

Cairn India currently has 10 percent stake in the block while ONGC has 65 percent interest.

The block now has 10 discoveries and appraisal drilling is now required to be carried out to assess the potential before finalizing development of gas fields.

Sharma said gas production from the KG block will begin in 2015-16, instead of

64

2013 as anticipated earlier.

Peak output from the field is seen at 20-25 million standard cubic meters per day, he said.

Apex court to hear Ambani gas dispute caseOctober 19th, 2009 NEW DELHI - The Supreme Court will Tuesday begin hearing of the dispute between the Mukesh Ambani-led Reliance Industries and Anil Ambani-led Reliance Natural Resources Ltd over supply of gas from the Krishna-Godavari basin. The Anil Ambani company wants to secure 28 million units of gas a day from the Krishna-Godavari basin for 17 years at $2.34 per unit and got a favourable verdict from the Bombay High Court in June.

Supreme Court to hear Reliance gas dispute October 19th, 2009 NEW DELHI - The stage is set for the Supreme Court to start hearing from Tuesday one of the most-watched battles in India's corporate history, involving Anil Ambani-led Reliance Natural Resources and elder Mukesh Ambani's Reliance Industries. At the crux of the dispute is the supply of natural gas from the Krishna-Godavari basin, awarded for exploration and harnessing to Reliance Industries, before a split in 2005 in the group founded by legendary industrialist, the late Dhirubhai Ambani.

Orissa court questions officials on Andhra project October 14th, 2009 BHUBANESWAR - The Orissa High court Wednesday issued notices to several key officials of the central government and the Andhra Pradesh and Orissa governments on a controversial mega irrigation project in Andhra Pradesh. "The petition was filed by Communist Party of India (Marxist) leader and former Orissa legislator Laxman Munda.

US files trade dispute over EU poultry import laws October 8th, 2009 GENEVA - The US asked the World Trade Organisation to rule on a European Union (EU) ban on US poultry treated with chemicals. The US

65

contends the EU ban does not comply with international trade rules, saying methods used in the country which involve chemicals are safe.

Anil Ambani group mulls defamation case against oil regulator October 8th, 2009 NEW DELHI - The Anil Ambani group sought a thorough probe by the home ministry into alleged partisan conduct of Director General of Hydrocarbons V.K. Sibal and said it will file a criminal case against him for defamation.

Anil Ambani group alleges misconduct by oil regulator October 6th, 2009 NEW DELHI - The Anil Ambani group has alleged misconduct by Director General of Hydrocarbons V.K. Sibal in a petition filed in the Supreme Court Tuesday and said he had a role in allowing a huge hike in the capital expenditure of Krishna-Godavari gas fields awarded to Reliance Industries.

Anil Ambani group wants government plea on gas dispute dismissed September 18th, 2009 NEW DELHI - The Anil Ambani group asked the Supreme Court to dismiss a government petition that questions the validity of its contract with Mukesh Ambani-led Reliance Industries for natural gas supplies from the Krishna-Godavari basin. The petition, filed by group company Reliance Natural Resources, says the government's argument that Reliance Industries cannot sell gas to any party without a prior state approval is not maintainable.

Krishna Tirath stresses transparency in social schemes September 17th, 2009 NEW DELHI - Woman and Child Development Minister Krishna Tirath said she had initiated fresh audits for her ministry and its schemes, with the aim to make the process of their implementation transparent. "Efforts should be made to address peoples grievances in public welfare programmes and no scope of negotiation should be left in the matters related to non-compliances, failure in programmes and projects, mismanagement of funds and noncooperation with social groups," the minister said at the national conference of chairpersons of the central and states Social Welfare Boards held here.

Anil Ambani group wants NTPC as party in Reliance gas row

66

September 16th, 2009 NEW DELHI - The Anil Ambani group asked the Supreme Court to make the state-run power utility NTPC a party to its dispute with the Mukesh Ambani-led Reliance Industries over natural gas supplies from the Krishna-Godavari basin. The petition said both NTPC and Reliance Natural Resources of the Anil Ambani group have common issues in their disputes with Reliance Industries over supplies of natural gas at $2.34 per unit for 17 years.

Anil Ambani group seeks to join NTPC-Reliance Industries row September 14th, 2009 NEW DELHI - The Anil Ambani group moved the Supreme Court, seeking to intervene in the dispute between state-run power utility NTPC and the Mukesh Ambani-led Reliance Industries over natural gas supplies from the Krishna-Godavari basin. The petition said both Reliance Natural Resources of the Anil Ambani group and NTPC have common issues in their disputes with Reliance Industries over supplies of natural gas from the said fields at $2.34 per unit for a period of 17 years.

Make insurance for daughters than pay dowry: Krishna Tirath September 11th, 2009 NEW DELHI - Women and Child Development (WCD) Minister Krishna Tirath urged people to take insurance policies for their daughters rather than pay dowry for their marriage, and announced that a social security system for housewives is being worked out. "We are working on a social security scheme for housewives.

Reliance Industries bound to supply gas to us: Anil Ambani firm September 9th, 2009 NEW DELHI - Anil Ambani group firm Reliance Natural Resources Ltd (RNRL) told the Supreme Court that Reliance Industries Ltd (RIL), belonging to elder brother Mukesh Ambani, was under a binding obligation to supply gas to it. In an affidavit filed in the apex court registry, RNRL also contended that the government had no role to play either in the utilisation or the fixing of gas price as per its contract with RIL.

NTPC moves apex court on gas row with Reliance Industries September 7th, 2009 NEW DELHI - State-run power utility NTPC Saturday moved the Supreme Court challenging the Bombay High Court order that had permitted Mukesh Ambani-led Reliance Industries to amend its petition on the ongoing Krishna-Godavari gas row. In the lawsuit filed in the apex court's registry,

67

NTPC said the July 31 ruling of the Bombay High Court that allows Reliance Industries to amend its response midway through the adjudication process was "legally untenable".

NTPC moves apex court against Reliance Industries September 5th, 2009 NEW DELHI - State-run power utility NTPC has moved the Supreme Court challenging the Bombay High Court order that permitted Mukesh Ambani-led Reliance Industries to amend its petition on the Krishna-Godavari gas row. Reliance Industries had told the Bombay High Court it cannot sell gas to NTPC at $2.34 per unit - which it had proposed in an international competitive bidding - since an empowered group of ministers had fixed the price at $4.2 per unit.

Government tells court it is not against Ambani pact September 1st, 2009 NEW DELHI - Reversing its earlier stand, the government Tuesday told the Supreme court that it was not in favour of declaring "null and void" the family pact between the two Ambani brothers, Anil and Mukesh. The government also told the apex court, ahead of a hearing Oct 20 on the feud between the companies led by the two brothers, that its policy on pricing and allocation of gas was without prejudice to another legal case involving state-run power utility NTPC

RIL successfully tests its peak output capacity of K-G fieldsMukesh Ambani-run Reliance Industries today said it has successfully tested the design capacity of its massive eastern offshore Krishna-Godavari basin D6 field production facilities.

No problems to industrialists due to ongoing agitations: AP CMAP CM K Rosaiah assured the industries running in the state that the ongoing Telangana and United Andhra Pradesh agitations would not affect their business as the Centre would solve these problems very soon.

RIL pumping out over 50 mmscmd gas from KG Basin: GovtReliance Industries is currently producing over 50 million standard cubic meters per day (miscode) of natural gas from the KG Basin D-6 fields, the government said.

68

RIL`s KG gas output crosses 50 mmscmd, topples ONGCReliance Industries has become the largest natural gas producer in the country with its over 50 million standard cubic meter per day (mmscmd )output surpassing state-run Oil and Natural Gas Corp`s output.

Two-third of extra RIL gas for power unitsThe govt on Tuesday allocated two-third of additional gas from RIL`s KG fields to power plants.

Gas supply to NTPC from KG basin to start soonMore than a month after it signed the contract for buying gas from Reliance Industries, state power utility NTPC Ltd is likely to finally begin drawing the fuel from KG basin field from this week.

NTPC may lose Rs 1,000 cr on buying imported LNGState-run NTPC may lose about Rs 1,000 crore as it opts for expensive imported LNG over natural gas from Reliance Industries` KG-D6 fields to fire its power plants.

RIL open to CAG audit on gas field expensesReliance Industries has told the government that it is "ready and open" to scrutiny by any of its agencies, including CAG, for the expenditure it has incurred on discovering and developing the KG-D6 gas fields.

Cairn JV seeks USD 6.75 per mmBtu Ravva gasA Cairn India-led joint venture has discovered a market price of USD 6.75 per mmBtu for the fuel from a field in the same basin.

Anil wonders what drives Mukesh-led RIL-`greed or vendetta`Fuelling their public spat, Anil Ambani on Friday wondered if "corporate greed, personal vendetta" or his advisers were driving elder brother Mukesh to deny gas to his group firm.

69

CHAPTER-V

CONCLUSION

70

Natural gas from Krishna-Godavari basin for south India from 2012 Union Petroleum Secretary S Sundareshan on March 20th said that south India will

start getting natural gas from the Krishna-Godavari basin from 2012.

The Ministry of Petroleum and Natural Gas had called for a meeting of Reliance

Industries Ltd (which owns the gas fields) and Gas Authority of India Ltd (which

lays pipelines) about ten days ago and told them to implement the project in a

“strict timeframe”. 

Reliance has been authorised by the government to lay a pipeline from Kakinada to

Chennai and this pipeline would further extend to Tuticorin. Reliance would also

lay a pipeline between Chennai and Bangalore, he told a press conference here. 

The gas would start flowing to Tamil Nadu anytime between March 2012 and the

end of that year, he said. There would be connectivity to Madras Fertilisers Ltd and

SPIC, he said, referring to the two fertiliser companies, whose operations are

suffering for want of natural gas.

On the issue of pricing of petroleum products, he said, “It is not possible to insulate

consumers continuously from the volatile international crude price and the

government has to take a hard decision in the future.

At present, subsidy component for petrol is Rs.5 per litre, for diesel Rs. 3, for

kerosene Rs. 16 and for LPG Rs. 260 a cylinder. Due to under-pricing the

government had incurred an expenditure of Rs.45,000 crore in the current financial

year. Poor people were forced to pay for supplying subsidised petrol and petroleum

products to those who were affluent. 

Increasing demand 

71

The Secretary said oil marketing companies were fully geared to meet the

increasing demand for petroleum products, which had been increasing at 15 per

cent per annum for petrol, 8 to 9 per cent for diesel, and 10 per cent for LPG. In

Tamil Nadu every year there had been a 10 per cent increase of LPG consumers.

The State had achieved a coverage of 75 per cent in respect of LPG supply in the

State, which might increase to 83 per cent in the next four or five years. 

There was no shortage of LPG supply in the State and new connections were being

released to prospective consumers without any waiting list and efforts were being

made to supply refills expeditiously.

To meet future demand, infrastructure was being augmented and LPG storage

facilities were being put up in Coimbatore, Ilayangudi, Tiruchi, Ennore and

Gummidipoondi, he added.

72

Bibliography:

www.yahoo.com

www.msn.com

www.google.com

www.ask.com

NEWS PAPERS

MAGAZINES

73

THANK

YOU

74