OREANDA-NEWS. May 10, 2011. Reliance started implementing the ministry's priority allocation order which had asked it to first supply natural gas from its eastern offshore KG-D6 fields to priority sector like urea-making units and power plants. Supplies to non-core refineries, petrochemical units and sponge iron plants will be made only if there are any volumes left after supplies to priority sector.

"Reliance this morning curtailed gas supplies to non-core users, including its own refineries and petrochemical plant," an industry official said. The oil ministry directive followed a sharp drop in output at KG-D6 fields. Production fell from 61.5 million standard cubic meters per day achieved in March, 2010 to under 50 mmscmd currently, instead of rising to about 69 mmscmd as was projected previously.

When contacted, a Reliance spokesperson did not offer any comments. Output at KG-D6, the nation's largest gas field, is just enough to meet the contracted demand of fertiliser units, power plants, LPG extraction units and city gas distribution firms that sell CNG to automobiles and piped cooking gas to households.

In face of falling output, Reliance had made a pro-rata cut in supplies of all its customers including priority users, the official said. Of the 57.17 mmscmd of KG-D6 gas for which contracts have been signed, 9.57 mmscmd has been cornered by steel, petrochemical and refineries sector.

Essar Steel has signed up for 3.2 mmscmd, Welspun Maxsteel 0.40 mmscmd and Ispat 0.59 mmscmd. Besides, Reliance's petrochemical plant gets 1.17 mmscmd and a sizeable 4.21 mmscmd goes to refineries including the Jamnagar units of Reliance. "Supplies to non-core users has not dried up completely as Reliance has some gas left after meeting priority sector requirement," the official said pointing to Essar Steel getting 0.6 mmscmd today against 2.8 mmscmd that it was drawing till yesterday.

Reliance had previously resisted implementing the order but fell in line once the ministry cited last year's Supreme Court directive that held that only government had the right to decide users of the gas. Welspun Maxsteel and Ispat last week approached the Bombay High Court seeking a stay on the ministry order, while Essar has approached the Delhi High Court. None of the courts have so far stayed the order.