News Detail

• The Directorate General of Hydrocarbon (DGH) has strongly recommended that Reliance Industries should not be allowed to recover expenses on underutilised infrastructure of KGD-6 and government should limit costs recovery only for infrastructure used by RIL for present gas production. The notice/letter, prepared by the DGH and sent by the Petroleum Ministry, has the backing of the Law Ministry and the Solicitor General of India. It charges RIL with failure to fulfil obligations under the terms of the Production Sharing Contract (PSC) and having deliberately and wilfully caused breaches, which have led to immense loss and prejudice to the Government and people of India.“You have over a period of time, failed to adhere to the terms of the PSC and have repeatedly failed to meet your targets under the PSC,'' it states.
• The DGH has further stated that RIL had failed to adhere to the additional initial field development plan (AIDP) and hence was a clear violation of the PSC. “In these circumstances, the Government has no other option but to restrict the recovery of costs incurred by you to the extent of the infrastructure used by you for the production of gas. In view of the aforesaid where you have persistently, time and again failed to adhere to the PSC, the Government hence shall disallow the following cumulative cost for the respective years. For 2010-11, $457 million have been disallowed and for 2011-12, $778 million, taking the total to $1.235 billion. The aforesaid figures are provisional subject to revisions by the Government,'' it states.
• Further, it states that it would also be fair and reasonable, in order to ensure adherence to the approved ADIP by you, that the disallowed contract costs shall be added to the respective years ‘profit petroleum' computed under clause 16 of the PSC for sharing between the Government and the contractor. “By the way of this letter, the Government directs you to adhere to the approved ADIP to meet the targets with respect to the committed gas production rates and forthwith submit to the Government a detailed plan envisaging the timelines/steps it plans to take with respect to the said adherence. Meanwhile, the Government will go ahead and implement the decision already outlined above,'' it adds.
• The DGH has pointed out that RIL was required to drill, connect and put on stream 22 wells by April 01, 2011, with an envisaged production rate of 61.88 mmscmd and 31 wells by April, 01, 2012 with an envisaged production rate of 80 mmscmd. However, against the aforesaid requisite number of wells to be drilled in accordance with AIDP, RIL till date has completed the drilling of only 18 wells and out of these 18 wells too, only 14 wells are presently in operation. “You have woefully fallen short of drilling the required number of wells under the AIDP and/or utilising the total number of wells already drilled by you has taken an irreparable toll on the projected production targets envisaged by you in the AIDP with the result that the production rate at present has plummeted to an all time low of 38.61 mmscmd only, which is stark contrast to the figures projected by you in the approved AIDP wherein you projected that the production rate would steadily increase over the years to touch 80 mmscmd rather than showing a gradual decline.''

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