Reliance Industries (RIL) chairman Mukesh Ambani and British Petroleum (BP) chief executive Bob Dudley met petroleum minister Veerappa Moily on Friday over issues related to their KG-D6 field that is struggling to meet production targets.
Dudley and Ambani were accompanied by BP India head Sashi Mukundan and RIL executive director PMS Prasad. Dudley also met finance minister P Chidambaram, but Ambani was not present in that meeting. According to sources, Dudley, whose firm in 2011 invested $7.2 billion in India, told Moily that no investment will come in oil and gas if signed contracts are not honoured.
Ambani said that if the government is citing production sharing contract (PSC) to say that no international expert can be appointed to verify reasons for fall in KG-D6 output, then how was one-man reservoir expert P Gopalkrishnan appointed by DGH and on whose recommendations RIL and BP were being penalised.
Moily said the Cabinet Committee on Economic Affairs (CCEA) will decide on the issue of not applying the new gas price based on the Rangarajan formula that will come into force from April 1, 2014 to the currently producing D1&D3 gas fields in KG-D6 block. "We have the inputs from the Planning Commission and the finance ministry. Everything is in place now. May be within a week or so, we would formulate the policy and in the light of the inputs given, it will go to the CCEA," he added.
Moily, however, added that RIL-BP were committed to staying invested in the country and will invest $10 billion in their domestic business by 2016/17.
Additionally, the government is seeking to impose a $1.8-billion penalty on RIL-BP on account of failing to meet production targets. The natural gas output from the block has declined to 14 million cubic metres per day (mmscmd) from 60 mmscmd at the end of 2010. The companies have cited geological complexities for the fall in output while the oil regulator believes they failed to drill enough wells.
The Directorate General of Hydrocarbons (DGH) has also asked RIL-BP to relinquish 8 gas discoveries holding 1.15 trillion cubic feet of reserves worth $14 billion from their eastern offshore KG-D6 block. DGH officials said they have recommended to the petroleum ministry that RIL be asked to surrender 86% of eastern offshore KG-D6 gas block for not meeting exploration timelines.