RIL may stall $5.2bn investment in gas field

Reliance Industries is mulling to put on hold the $5.2-billion investment in developing a gas field off the east coast following a threat from lead vendors and bankers to stop equipment supplies and finances over doubts about the company’s ability to payback. The doubt has arisen following absence of government approval of its proposed fuel price.

Several equipment suppliers including Aker Kvaerner of Norway over the past few weeks have raised serious queries about the cash flow Reliance has projected from sale of gas from KG-D6 fields beginning, in absence of the government approval for gas price of up to $4.58 per mbtu, sources said.

More serious is the threat from vendors who have asked Reliance if they can squeeze in works of rivals like ONGC and Gujarat State Petroleum Corp, in their already overbooked production facilities.

Once vendors like Aker Kvaerner take up work of ONGC or GSPC, Reliance may not get a berth for atleast next couple of years due to tight global supply scenario.

Sources said Reliance is sending its top officials to Europe and the US next week to try and convince them to stay on the project in the backdrop of further delays in gas price approval being anticipated because of demands from certain quarters that the whole issue be addressed by either an Empowered Group of Ministers or the Cabinet itself.

Reliance cannot take the risk of contracting equipments and supplies and land up in a situation where it has to pay up from its other businesses as the $5.2 billion investment commitment was based on certain cash flow projects from the proposed gas sale price, they said adding Reliance was likely to put on hold the investments if price approval did not come this month.

Reliance gas price approval will be delayed by atleast six months to a year if the Government decided to implement the suggestion of a Committee of Secretaries for framing a gas utilisation policy before seeking EGoM or the Cabinet to approval.