The Petroleum Ministry has justified that the extensions given to Reliance Industries Ltd to undertake exploration activities in the Krishna Godavari D6 block were according to the production sharing contract (PSC).
According to sources privy to the developments, the Directorate-General of Hydrocarbons, in its response to a query raised by the Public Accounts Committee (PAC) on issues flagged off by the CAG audit of the block, has said so.
The Ministry was asked to justify the decision to grant extension in exploration phase to the contractor, Reliance Industries, in the backdrop of allegations that the contractor has violated the PSC.
The country's largest gas fields operated by Reliance Industries have been in news for all the wrong reasons in the recent past, including a significant drop in output to 38-39 mmscmd after hitting the peak of 60 mmscmd.
The original exploration period for the block — KG-DWN-98/3 — based on the PSC was from June 2000 to June 2007 comprising three phases (three years + two years + two years).
During Phase I — June 2000 to 2003 — the contractor (Reliance Industries) was granted 12-months extension from 2003 to June 2004. This was to enable it to complete the minimum work programme. However, the 12-month extension was set off in Phase II. Thus, Phase II was from June 2004 to 2005.
The Phase III period was from June 2005 to 2007. According to the PSC, maximum six months extension — with set-off from next phase — in an exploration phase can be granted to the contractor for completing minimum work programme, with the consent from the management committee. A management committee, comprising a Government nominee, a nominee from the Directorate-General of Hydrocarbons, and representatives of the contractors, overseas the operations of the block.
The Government, on April 18, 2006, issued the Extension Policy, which has provisions to grant extension beyond the six months period envisaged in the PSC. Under this policy, extension in exploration phase can be considered an excusable delay on account of delay in grant of licence/permit.
The D6 operator had requested for 36 months extension in July 2006. Extension granted for excusable delay entitles the contractor more time than what is stipulated in the PSC, whereas extension granted on other grounds gets set off in subsequent phase without prolonging the PSC time. A distinction needs to be made between the two time extensions, an official said.
In this case, all extensions were given in accordance with PSC provisions and conditions of the Extension Policy, the official said.