RIL/RNRL/NTPC: Product Sharing Contract
Underline the MOU sentence where the price is subject to Govt. approval? Or in the PSC?
Page 308 and point number 316 of the Court order says “as far as the price factor is concerned
Article 21.6.3 of Production Sharing Contract (PSC) emphasizes that “the formula or basis on which the prices shall be determined …… shall be approved by the Government prior to the sale of natural gas to the consumers/buyers”
Volume is not a problem.80 by July 31 and 120 by March 31.
RIL has
never submitted any such development program which states that peak production
level is to reach at 120 mmscmd. With current estimates
The NTPC price bid was a clean price for supply of gas.
Price was
always a subject of Government approval as per Article 21.6.3 of Production
Sharing Contract (PSC)
The RNRL agreement/MoU refers to the draft agreement with NTPC. Which is
at $2.34.even if the price is changed by the Government now
Prima facie, agreement
with NTPC was not a “concluded contract”.
Secondly
Nothing in the PSC says that the sale price and valuation price cannot be different.
It is mentioned in Article 21.6.3 of PSC that “the formula or basis on which the prices shall be determined …… shall be approved by the Government prior to the sale of natural gas to the consumers/buyers”. It clearly depicts that the approved price should be used for valuation as well as the sale of gas.
If NTPC price is approved by the Government at $2.34
As per the PSC
The earliest that they expect gas to be available to RNRL is in June/July 2012. They expect 6 months for Supreme Court decision and then 2.5-3 years to start commissioning power plants.
A power plant of such large scale takes at least 5-6 years of commissioning.
They will not sign EPC contracts or place any orders until gas supply agreement is in place.
As the matter is in
Supreme Court now
Government will never get 85% share in gas output as RIL will continue increasing capex.
RIL has
already submitted its Field Development Program according to which the
development cost of the field is $8.8 billion. This expenditure has already
been approved by the Directorate General of Hydrocarbon (DGH). Government has
also approved the price which would be the basis for valuation of the field. As
soon as RIL recovers 2.5x of its total investment
The rejection of the RIL/RNRL contract in July 2006 by Government was a rejection of the valuation price and not of sale price or that of a valid commercial contract existed.
As per the PSC
Power plants cannot afford $4.20 + transportation charges as it leads to cost of power being uncompetitive to coal.
Gas can not compete
with domestic coal in power generation as the domestic coal is cheaper than
gas. However
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