RIL and RNRL ink revised gas supply pact

Reliance Industries Ltd. (RIL) and Reliance Natural Resources Ltd. (RNRL) announced the signing of a revised gas supply master agreement (GSMA). RNRL said that the new GSMA with RIL was signed on June 25 pursuant to the judgment of the Supreme Court, dated May 7. RNRL also said that it will now take appropriate steps requesting the Government of India for expeditious allocation of natural gas to facilitate implementation of the same.



The price, quantity and the tenure of the natural gas to be supplied by RIL to RNRL from its KG basin block will be decided by the Government. However, some reports suggest that the new GSMA between the two companies entails supply of 28 mmscmd natural gas for 17 years at US$4.20 per mmbtu. RIL said that the GSMA is compliant with the government's Gas Utilization Policy and EGoM decisions.

Shares of Reliance Industries recovered from the day’s low and ended up 1% at Rs1,063. It had earlier touched a low of Rs1,043. On the other hand, shares of RNRL climbed by 3.3% to Rs65.95 after being as high as Rs68.65. Reliance Power ended flat at Rs168 after touching a high of Rs171.85.

In May 2010, the Supreme Court (SC) had ruled that the family memorandum of understanding (MoU) under which RNRL claimed cheap gas from RIL was not binding and that the Government regulation overrides the MoU. The SC had ordered RIL and RNRL to renegotiate a gas supply pact within six weeks.

The SC verdict squashed a Bombay High Court judgment given in June 2009, which had directed RIL to supply RNRL 28 million standard cubic metres a day (mmscmd) of gas from RIL's Krishna-Godavari basin for 17 years at US$2.34 per million British thermal units (mmBtu). The gas price was 44.28% lower than the price fixed by the Government for gas sale from the RIL block in the KG basin at US$4.2 mmBtu. After the SC hearing, the two estranged Ambani brothers scrapped a non-compete agreement, which had prevented both of them to step into each other's business areas.