Faced with a gas crunch at its petrochemical plants, Reliance Industries has asked the Oil Ministry to review the prioritisation worked out while imposing cuts on KG-D6 gas supplies to non-core users, as per PTI. As output from the KG-D6 fields fell from 61.5 mln standard cubic metres/day to less than 48 mmscmd, the Oil Ministry has ordered Reliance to first meet the full demand of priority users, power, fertiliser, city gas and LPG plants, before supplying to non-core industries. Since output is barely above core sector demand, supplies to steel plants, refineries and petrochemical units have been cut. Reliance is the biggest loser, as it faced cuts at both its refineries and petrochemical units. Reliance said this policy was reiterated by an Empowered Group of Ministers, which allocated KG-D6 gas among various users in May, 2008. "The government had allocated 2.59 mmscmd of KG-D6 gas to (state-run) GAIL for LPG and 1.92 mmscmd to Dahej/Nagothane petrochemical plants of Reliance.”
Natural gas predominantly consists of methane and small percentages of higher fractions of ethane, propane and butane. Whereas ethane is the feedstock for petrochemicals, propane and butane are mainly used for production of LPG. Since these are value-added fractions, the government has always mandated that gas must be stripped of higher fractions before supply to various consumers. Various petrochemical and LPG plants were set up in India as a result of this policy.
"While making the allocations in line with policy decided by the EGoM, it was directed that all locations where higher fractions are being used as fuel should be identified and steps should be taken to stop such usage of higher fractions as fuel by supplying lean gas at such locations," it said. Reliance said while other sectors like steel have an option to use imported LNG, gas-based petrochemical units as well as LPG plants have to mainly rely on domestic sources of rich gas.