House panel says RIL be treated as ‘defaulter’ over KG-D6

A Parliamentary standing committee on petroleum and natural gas has observed that non- adherence by Reliance Industries Ltd to the approved field development plan for the Krishna-Godavari D6 gas block should be construed as ''default''.

The committee, which submitted its recommendations last month, also suggested that the petroleum ministry should explore all possible options and take corrective measures to increase gas production from the KG-D6 block as recommended in a study commissioned by the Directorate General of Hydrocarbons (DGH).

''The committee has taken serious note of the statement made by the ministry that the contractor (RIL) failed to adhere to the approved field development plan, both in terms of gas production as well as drilling and putting on-stream the required number of wells even after repeated reminders,'' it said.

The committee also approved the action taken by the ministry in respect of cost disallowance of $1 billion to the contractor based on the arbitration procedure.

 "In view of the above, the committee is of the opinion that non-adherence by the contractor to approved field development plan should be construed as 'default' and not just failure and remedial action by the ministry in this regard must be premised on 'default' by the contractor not on 'failure'," the committee said.

Somabhai Gandalal Koli Patel, Lok Sabha member from Surendranagar constituency of Gujarat, was the acting chairman of the standing committee.

Congress MP Vundavalli Arun Kumar, who was chairman of the committee when it was formed, said the recommendations were submitted to the speaker's office and that the government will have to give the action taken report on the recommendations.

The committee observed that the KG D-6 is one of the successful discoveries in the NELP regime, which gave hope to the country in its quest for exploration of hydrocarbon resources.

According to the committee's report, the planned production as per the approved field development plan was 33.83 mmscmd in 2009-10, going up to 86.73 mmscmd in 2012-13. However, the production for the KG D-6 basin started declining as the actual production plummeted from 55.89 in 2010-11 to 26.18 mmscmd in 2012-13.

The committee said the contractor has not adhered to the measures suggested by the regulator DGH to drill wells to increase natural gas production.

"Also, coincidently, the demand for the increase in the price of natural gas by the contractor over and above the discovered price by arms length mechanism as provided in the PSC has also brought question mark regarding the interest of contractor to abide in the sanctity and stability of the PSC," it said.

The committee also observed that a study conducted by experts appointed by the DGH on the decline in KG D-6 production had concluded that the reserves as estimated earlier which are around 10 TCF (trillion cubic feet) are still available and that remedial measures will help the production to go up.

The cost disallowance of $1.005 billion imposed on RIL has been taken for arbitration by the company.