In less than a month of stopping supply of cheap gas from the D6 block to city gas distribution firms, the government has ordered cuts in supply to power plants as output from Reliance Industries-operated block has slumped below 40 million standard cubic meters per day (mmscmd), a government official said.
As a fallout of the cut, city gas distributors are planning to raise prices of gas supplied to kitchens and automobiles as they will have to substitute the supply with imported liquefied natural gas (LNG), which costs four times the local gas, executives working for two city gas distribution firms said, requesting anonymity.
The government has fixed D6 gas at $4.20 per unit for five years ending April 1, 2014 while LNG in spot markets cost $16-18 per unit. Dwindling output from D6 is now affecting the power sector, which is facing a pro-rata supply cut due to about 21% reduction in D6 gas supply. They are forced to buy costlier imported fuel to run their plants.
Against the signed gas sale purchase agreement (GSPA) for 29 mmscmd, power firms are getting about 22-23 mmscmd gas. "Theoretically, if output drops further to below 17 mmscmd, no KG-D6 gas would be available for power sector and allocation to LPG (liquefied petroleum gas) sector could be affected. Fertiliser sector consumers would be the last to face supply cuts," a government official with direct knowledge of the matter said on condition of anonymity.
The oil ministry had stopped supply of D6 gas to non-core consumers such as steel, refineries, petrochemicals and captive power plants since March 30, 2011 to meet demands of core sectors, fertilizer, LPG, power and CGD in the order of priority. ET reported it first on April 23.
An EGoM, which is headed by Finance Minister Pranab Mukherjee, had fixed D6 gas price and identified its consumers much before the first gas from the block produced on April 2, 2009. It had allocated 63.61 mmscmd gas on firm basis to several consumers and 30.16 mmscmd on fall-back basis on the premise that the D6 would achieve a peak production of 80 mmscmd by 2012-13.
But output from the block started declining since March 2010 after peaking at about 61.8 mmscmd due to unexpected reservoir behaviour. According to oil minister Jaipal Reddy's written statement in the Lok Sabha last week, Reliance-operated D6 block experienced steep decline in gas output because it drilled only 22 wells against 31 wells approved for drilling by March next year.
As a fallout of the cut, city gas distributors are planning to raise prices of gas supplied to kitchens and automobiles as they will have to substitute the supply with imported liquefied natural gas (LNG), which costs four times the local gas, executives working for two city gas distribution firms said, requesting anonymity.
The government has fixed D6 gas at $4.20 per unit for five years ending April 1, 2014 while LNG in spot markets cost $16-18 per unit. Dwindling output from D6 is now affecting the power sector, which is facing a pro-rata supply cut due to about 21% reduction in D6 gas supply. They are forced to buy costlier imported fuel to run their plants.
Against the signed gas sale purchase agreement (GSPA) for 29 mmscmd, power firms are getting about 22-23 mmscmd gas. "Theoretically, if output drops further to below 17 mmscmd, no KG-D6 gas would be available for power sector and allocation to LPG (liquefied petroleum gas) sector could be affected. Fertiliser sector consumers would be the last to face supply cuts," a government official with direct knowledge of the matter said on condition of anonymity.
The oil ministry had stopped supply of D6 gas to non-core consumers such as steel, refineries, petrochemicals and captive power plants since March 30, 2011 to meet demands of core sectors, fertilizer, LPG, power and CGD in the order of priority. ET reported it first on April 23.
An EGoM, which is headed by Finance Minister Pranab Mukherjee, had fixed D6 gas price and identified its consumers much before the first gas from the block produced on April 2, 2009. It had allocated 63.61 mmscmd gas on firm basis to several consumers and 30.16 mmscmd on fall-back basis on the premise that the D6 would achieve a peak production of 80 mmscmd by 2012-13.
But output from the block started declining since March 2010 after peaking at about 61.8 mmscmd due to unexpected reservoir behaviour. According to oil minister Jaipal Reddy's written statement in the Lok Sabha last week, Reliance-operated D6 block experienced steep decline in gas output because it drilled only 22 wells against 31 wells approved for drilling by March next year.
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