The Oil Ministry has sought legal opinion on whether bank guarantees need to be furnished by Reliance Industries Ltd (RIL) alone or by partners BP and Niko Resources as well to cover the increase in gas prices from April.
The ministry had felt that since charges of gas hoarding had been levelled against RIL, the company alone should submit bank sureties equivalent to the incremental price that the consortium would get the output from KG—D6.
RIL had represented against this, saying it owns only 60 per cent of KG-D6 and would get a proportionate share of the incremental revenue, sources privy to the development said.
BP Plc of UK has a 30 per cent interest in the eastern offshore KG-D6 block and the remaining 10 per cent is with Niko Resources of Canada.
Sources said the Oil Ministry has now sought the Law Ministry’s opinion on which of these companies should provide the bank guarantees and how they should be submitted.
The new rates for gas, starting from April 1, are based on the average of global benchmarks and LNG import prices and will apply to production by private and state—owned companies.
While production of gas at KG—D6 has declined, the government agreed in December to allow RIL to charge higher prices provided the company furnished bank guarantees to settle any claim against it over the shortfall in output.
The bank guarantee, equivalent to the incremental revenue that the KG—D6 consortium would get from the new gas price, would be encashed if it is proved that RIL hoarded gas or deliberately suppressed production at the main Dhirubhai—1 and 3 (D1&D3) fields in the KG—D6 block since 2010—11.
The bank guarantee for 0.3 tcf of gas comes to $1.2 billion, sources said. RIL’s share of the surety would work out to about $60 million per quarter.