For failing to meet its production sharing contract commitments for exploration and production activities, Reliance Industries Ltd (RIL) has paid $78.88 million as penalty to the Government in the last three years (2009-10 to 2011-12).
The Minister of State in the Ministry for Petroleum & Natural Gas Panabaaka Lakshmi informed Lok Sabha today, responding to a question on whether the Government has levied any penalty on the private players due to various reasons including shortfall in production.
She said in case of exploration of oil/gas under the production sharing contract regime, penalty provisions exist for payment of liquidated damage on account of the unfinished minimum work programme, phase extension etc by the contractors.
On RIL-operated KG-D6 block, the Minister said that the actual cumulative gas production for D-1, D-3 fields in the block up to March 31, 2012, was 1.584 trillion cubic feet, as against the projected cummulative production of 2.030 trillion cubic feet in the addendum to the initial field development plan for the same period.
The Minister said that the Directorate-General of Hydrocarbons has reported that the dip in production from the block in 2011-12 was because out of 18 gas producing wells in the D-1 and D-3 fields, six have ceased to produce due to water/sand ingress in well bores. Also, out of six oil/gas producing wells in MA fields in the block, two wells have ceased to flow oil/gas because of water ingress.
Besides, non-drilling of required number of wells in D-1 and D-3 fields by the contractor in line with the addendum to the initial field development plan approved by the block management committee was cited as another reason for output not improving.
The Minister said that the contractor has attributed various reasons for reduction in reserves from the fields. The reasons include production performance, pressure decline, early water encroachment, less contribution from the sands outside the main channel areas, and geological models.
The Government in May last year issued notice for proportionate disallowance of cost of production facilities amounting to $1.005 billion. RIL has invoked arbitration proceedings on the matter, and the Government has also appointed arbitrator, the Minister said.