The Government has ruled out any change in the existing production sharing contract with reference to Reliance Industries Ltd-operated Krishna Godavari Basin D6 block.
This is seen by industry observers as toning down of the Government’s earlier position of amending the production sharing contract, if need be, for taking action against the operator for output from producing fields falling below target.
"There is no change in the production sharing contract (with Reliance). If there will be any changes, it will be introduced in the tenth edition of oil and gas auction rounds and will be prospective," the Petroleum Minister, Mr S. Jaipal Reddy, said.
Speaking on the sidelines of the 3rd India-Africa Hydrocarbons Conference, here, the Minister said, “It (the arbitration notice) is under consideration.”
The Petroleum Ministry will be consulting the Law Ministry on the same.
Taking an aggressive stance, Reliance Industries had last month sent an arbitration notice to the Petroleum & Natural Gas Ministry on the latter’s intent to disallow some of the expenditure incurred by the company in the East Coast fields.
Reliance has come in for severe criticism for its inability to check the falling output from the gas fields in the D6 block.
While stating that he would not like to indulge in any interpretation of production sharing contract and let the experts do so, the Minister said, “we will do nothing that will affect the pace and quantum of production from the D6 block…we will not allow the work schedules of the block to be affected.”
According to reports, the Ministry has decided to disallow expenditure incurred in constructing production and processing facilities at D-1 and D-3 gas fields in the D6 block that are currently underutilised and have excess capacity because of drop in output.
Reliance has sent an arbitration notice on the grounds that the move to recoup the expenditure is illegal as it is against the production sharing contracts. Reports had indicated that $1.85 billion out of the $5.69 billion investment already made in the facilities will be disallowed by the Ministry and arbitration initiated to recover that from RIL.
The company is currently producing 42 mmscmd from the gas fields.