In the next three-four weeks, the Petroleum Ministry will decide on the action to be taken against Reliance Industries Ltd for its gas output falling below target from the East Coast fields.
Mr G.C. Chaturvedi, Secretary, Ministry of Petroleum, said, “We had sought the views of the Law Ministry. Our Ministry is examining their views. In the next three-four weeks, we will be able to decide on the future course of action.”
The Secretary was speaking on the sidelines of an energy conference here on Tuesday.
The Ministry is said to have decided to disallow expenditure incurred in constructing production and processing facilities at D-1 and D-3 gas fields in the Krishna Godavari Basin block that are currently under-utilised and have excess capacity because of drop in output. This was contrary to the production sharing contract norms.
Industry trackers say, “the expenditure is approved by the management committee, which overseas operations of the block, not once but twice. First, when the initial proposal is made and then every year the investments are approved. Besides, in the management committee, Government representatives are also there.”
Amount not quantified
According to reports, the Petroleum Ministry has made up its mind to take ‘scrupulous' action against RIL, the operator of D6 block for the drop in output below the target.
He said that the Law Ministry had not quantified the amount. Reports had indicated that $1.85 billion out of the $5.69 billion investment already made in the facilities will be disallowed and arbitration initiated to recover that from RIL.
On whether the Ministry will amend the production sharing contract, the Secretary said, “if need be we will.” Currently, there is no mechanism in the production sharing contract for disallowing investments. Besides, any change in production sharing contract has to go to Parliament as the contract is between the Government and the operator.
Reliance is currently producing 42 mmscmd from the gas fields. Reliance has been unable to control the drop in output from D-1 and D-3 gas fields in the block.
The operator has been suggesting that the only solution available was for it to develop the satellite fields around the currently producing fields in the block and bring them to production.
So far five gas fields have been discovered in D6 block. Of this two (D-1 and D-3) are producing. At the recent management committee, commerciality of the Dhirubhai-34 gas fields was agreed upon.