Reliance has officially declared 80-mmscmd gas that it can provide to its players. Of that 40 mmscmd is stuck in court cases especially because 28 mmscmd is the gas, which RNRL is supposed to get, and 12 mmscmd is what NTPC is to get.

To the current ruling which on the recommendation of EGoM which came in yesterday peg the gas price from KG Basin at USD 4.20 cents that’s slightly lower than the gas price recommended by Reliance because Reliance has been recommending USD 4.33/mmbtu as a gas price for KG Basin gas and from that end it’s a slightly low and analyst were expecting gas pricing to hover around USD 4.2 to 4.3 so that’s very less dilution from what analyst expected.

The only issue remains is that whether Reliance will be able to provide this gas to various customers. Of the 40 mmscmd of gas which will be priced at USD 4.2 mmbtu, nearly 25.1 is being kept for Reliance itself and remaining 16 has to go to RNRL as per the demerger agreement they have. 25.1 mmscmd of gas, which Reliance has for itself can be provided to other players if Reliance requires that and many other players are placing their bets on that gas. It means Reliance had ask from various power and fertilliser companies for this gas. This price is fixed for that particular gas there and now the market would be watching out the RIL-RNRL case.

If it gets resolved, then it will have a positive impact but if it gets extended, then the cash flows from this gas will be delayed by suitable time because the gas from KG Basin is expected from July 2008.

Break-up of the gas
(mmscmd)
RNRL 28+16
NTPC 12
RIL 25.1

Analysts were of the view that there will be no impact and most of the factoring will be done at $ 4.33 for 40 mmscmd. RIL-RNRL gas of 28 mmscmd may go for lower price while 16 mmscmd will go at market rate of $ 4.20. It all depends on RIL-RNRL case which is in High Court.

CSFB commented on the RIL gas pricing that govt nod for KG-D6 gas formula has little upside until case continues.