Reliance Industries Ltd, govt lock horns over panel meet

Written by fe Bureau | New Delhi | Updated: Nov 5 2013, 14:05pm hrs
The government seems to be blowing hot and cold on the regulation of Reliance Industries' hydrocarbon ventures. Intensifying tensions between RIL and the Directorate General of Hydrocarbons (DGH), the regulator has disputed the company's version of the proceedings of a recent management committee (MC) meeting on the KG-D6 block.

Sources said that RIL had circulated its version of the minutes of the October 1 MC meeting, but the DGH rejected the minutes, saying they did not "reflect the true proceedings of the meeting".

The DGH did not elaborate on where the minutes varied with the proceedings. The MC works like a board of directors and takes decisions together.

According to RIL, the MC meeting on the fall in production at KG-D6, the source of conflict with the regulator, remained inconclusive whereas the DGH has said the meeting took note of the fact that the fall in output was because of insufficient number of wells being drilled by the company.

RIL contends that the production fall is due to geological reasons. The company, sources said, refused to sign a resolution which disagreed with its contentions. According to sources, the MC finalised the resolution after considering the reasons stated by RIL for lowering reserves in the producing Dhirubhai-1 and 3 gas fields in KG-D6 to 3.4 trillion cubic feet (tcf) from 10.03 tcf approved in 2006.

The MC comprises the DGH and oil ministry, apart from RIL nominees.

If such a resolution is made by the MC, it would mean that RIL could continue to receive the existing price of $4.2/ million metric British thermal units (mmBtu) for KG-D6 gas even in the next financial year. The oil ministry has proposed to the Cabinet that the current rate of $4.2 per mmBtu be paid for gas from the D1 and D3 fields in the KG-D6 block until it is proved that RIL did not deliberately suppress output.

However, a revised investment plan for a third field MA where output has dropped by 60%, has been accepted by the MC and it will get the benefit of the new gas price to be arrived from the Rangarajan formula starting April 2014.

The DGH has blamed RILs failure to drill the committed wells for the gas output falling by over 80% from the KG-D6 block, instead of rising to the planned 80 million standard cubic metres per day. On the other hand, RIL is of the view that the reserves have dropped due to previously unknown geological factors and the undrilled quota of 11 wells would not increase production.

There is also disagreement between the two sides on RIL's proposal to appoint an independent international expert to go into the decline and to verify if gas is being hoarded.

The DGH believes that having already appointed a reservoir expert, P Gopalakrishnan, in 2011 to review the performance of KG-D6, there is nor need for a further to study the matter.