Parliament’s Public Accounts Committee (PAC) has pulled up the petroleum ministry for allowing...
Parliament’s Public Accounts Committee (PAC) has pulled up the petroleum ministry for allowing Reliance Industries to retain the entire contract area of KG-DWN-98/3 block (commonly known as KG-D6). The decision was taken by the UPA government in February 2009.
Under Article 4.1 of the production-sharing contract (PSC), 25% of the block area must be relinquished after the first phase of exploration programme is complete. The PSC says from the second phase, the contractor is allowed to retain only the ‘discovery area’ but in this case, the contractor was allowed to retain the entire area.
The PAC, sources said, has asked the ministry why the Directorate General of Hydrocarbons (DGH), which asked RIL to relinquish the area in May 2004, took a U-turn in 2005 by agreeing to treat the entire area as discovery area.
According to the article 1.39 of the PSC, the discovery area means that part of the contract area about which, based on discovery and results obtained from a well or wells drilled in such part, the contractor is of the opinion that petroleum exists and likely to be produced in commercial quantities.
The audit committee is of the view that the decision taken by the government is in ‘violation of contractual terms laid down in the PSC’, the official added. RIL should have relinquished 25% of the contract area after June 6, 2004.
The petroleum ministry is learnt to be readying its defence to be placed before the PAC. The ministry reviewed the issue of relinquishment of 25% of the block area at the end of phase I during 2007 and 2008.
Thereafter, the petroleum ministry came to the conclusion that based on the technical data provided and coverage of the entire block area by 2D seismic survey and the 10 wells drilled in the first phase being gas bearing, “on the basis of technical merits, it was not unusual to draw the inference to retain the total area”.
On June 6, 2004, DGH asked RIL to relinquish 25% of block area before entering second phase as laid under article 4.1 of the PSC. However, the private explorer said that hydrocarbon is likely to be produced in commercial quantities after an exhaustive exploratory and appraisal programme from the contract area.
“The contractor also mentioned that it will be over all national interest as any prematurely relinquished area may be mistaken as non-prospective and consequently further exploratory/appraisal efforts, which the contractor plan to undertake in such area may be either get deferred or may never be under taken,” said the official.
Finally, on July 11, 2006, the management committee comprising representatives of RIL, the ministry and DGH informed the petroleum ministry that the entire area would be retained. Following this, then additional secretary at the ministry held three meeting between November 2007 and April 2008.
On February 2, 2009, the petroleum ministry, citing articles 4.2 and 4.3 of the PSC and considering technical inputs, conveyed that the entire contract area of the block — KG-DWN-98/3 — has been accepted as the discovery area.
The KG-D6 fields began production in April 2009 and touched a peak of 69.43 mmscmd in March 2010.
Currently, the output is around 11 mmscmd. The total contract area of KG-D6 was 7,645 sq km. In October 2013, a chunk of it was relinquished and the present contract area is 1,148.12 sq km.