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• The government will serve a notice on Reliance Industries for breach of contractual obligations in the D6 block, where gas production has fallen sharply, oil minister Jaipal Reddy said, hardening his ministry's stand on the issue that has triggered an arbitration notice from Mukesh Ambani's firm."This is a very serious issue and the consequences are also going to be very serious," Reddy told reporters after visiting the block along with Reliance officials, including Executive Director PMS Prasad. Government officials said the minister went there only to familiarise himself with the block and that his visit was not related to next week's scheduled trip of the Public Accounts Committee of Parliament that is studying the CAG's report on the block.
• Output from the D6 block in the Krishna Godavari basin in the Bay of Bengal was expected to rise to 80 million metric standard cubic metres a day (mmscmd) but after rising initially, it has fallen sharply, forcing power producers, fertiliser makers and other customers to turn to costly imports of liquefied natural gas (LNG)."Reliance had promised to supply 70 mmscmd of gas from the D6 block of the Krishna-Godavari (KG) basin, wherein each mmscmd can support up to 210 MW of power generation. However, the supply of gas from RIL's D6 block has come down drastically to as low as 37 mmscmd so far this year. And it is projected to fall further to around 27mmscmd next year," he said.
• RIL has initiated arbitration against the government following reports that the oil ministry would penalise it for the fall in output. It says that the production sharing contract clearly allows the operator to recover its entire cost from gas sales, but the government is considering restrictions on cost recovery as the output is lower than what was envisaged."The issue involves both technical and legal predicaments. Accordingly, we have consulted the law ministry and sought the Solicitor General of India's advice. We are serving notices on RIL. I cannot elaborate more than this at this stage," Reddy said.
• Reliance has argued that output has fallen due to geological and technical complexities, while the government says the company should be blamed as it had not drilled as many wells it promised to. Global major BP's CEO Bob Dudley had told ET in an interview that simply drilling more wells would not boost production as the exercise was similar to putting more straws in a can of coke. BP has acquired a 30% stake in Reliance's blocks for $7.2 billion.Reddy visited the block ahead of a scheduled visit of a team from the 22-member all party Parliamentary public accounts committee, headed by opposition leader Murali Manohar Joshi of the Bharatiya Janata Party.Members of the PAC are evaluating the report of the Comptroller and Auditor General of India that alleged that both the petroleum ministry and its technical and regulatory arm, the DGH, had been lenient towards Reliance and other private companies involved in oil and gas blocks.

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