a win-win for both sides - the bank guarantees secure the government's interests and higher gas price protects the operator's interests," the official said. He added that if the hoarding allegations are true, the bank guarantees would be encashed, with interest, for the period from April 1 to the date the charges are proved.
From April 1, all domestic gas will be priced at an average of international hub prices and the cost of LNG imported into India. Prices will change quarterly, based on the previous one-year average.
RIL will have to provide a bank guarantee for USD 135 million, presuming a gas price of USD 8.4 per million Btu in April.
The penalty in the form of the lower gas price would have been the second imposed by the Oil Ministry on RIL for falling short of stated production targets. It had already levied a USD 1.8 billion penalty for the output drop and the issue is before arbitration.
Gas production from the D1&D3 fields has fallen to less than 10 million standard cubic metres per day from the peak of 54 mmscmd in March 2010.
Production has been lower than target since the latter half of fiscal 2010-11 and it should currently have been 80 mmscmd, as per the 2006 investment plan.
Output from the MA oil and gas field in the KG-D6 block, too, has fallen over 62 per cent.
However, the ministry and the oil regulator DGH have agreed with RIL's reasoning of geological complexity being responsible for the drop and approved the higher price for the MA field's output.