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RIL Contemplating Dropping Arbitration Request

Saturday, September, 10, 2016

Reliance Industries’ board is considering dropping the arbitration against the government next year concerning the authority the government has to fix gas prices. Reliance would need to withdraw from arbitration if it intends to charge higher prices for deep sea gas per a new government policy.


The company has yet to state if it will withdraw from arbitration officially following the policy announcement, but it did initiate proceedings of developing deep sea fields located in the KG Basin. They have also sought contractors with partners for concept engineering and design for deep water development.


According to a source close to the proceedings, “… Reliance Industries has sought vendors for the field [showing] it is keep on developing it. Dropping arbitration is a precondition for availing higher prices for gas from the field.” The source went on to call it a purely business decision.


The new policy concerning gas prices could potentially be a benefit to Reliance Industries regarding its eight discoveries with reserves of more than two and a half trillion cubic feet of gas. The highest price available to gas from difficult fields in the country of India is $6.61 per unit under the current policy. This is calculated through a government formula that compares favorably with the spot liquefied natural gas rates throughout the world that currently range from $5 to $6 per unit. The current price available to domestic natural gas from other fields is closer to $3 per unit. The price of gas from the difficult fields in question has been linked with alternative fuels.