Reliance Industries (RIL) on Monday signed gas sales and purchase agreements with steel

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makers including Essar Steel and Ispat Industries for supplying 3.75 million standard cubic meters per day (mmcmd)of natural gas from its offshore Krishna Godavari-D6 basin.

The agreement, which will be reviewed at the end of five years, will boost profitability of the steel firms who had been buying expensive LNG or naphtha to meet feedstock shortage at their plants, a senior official said.

The petroleum and natural gas ministry had last week asked RIL to sell natural gas to steel companies such as Essar, Ispat and Vikarm Ispat to help the nation's most prolific gas field to produce at optimum level.

As per the agreements, Essar will get 2.86 mmcmd of gas, Ispat 0.53 mmcmd and Vikram Ispat the remaining 0.36 mmcmd at government-approved rate of $4.20 per mmBtu.

“We had identified sectors that would consume the initial 40 mmcmd output from KG-D6. But some of them like CNG supply projects in cities are unable to take their entire allocation and that is now being reallocated to steel firms,” the official said.

At present, RIL is restricting output from KG-D6 to 28 mmcmd as not all of the power and fertiliser customers, identified by the government, are taking their full quota of allocation.