RIL opposes govt move to take away discovered gas fields

Reliance Industries has gone back on its readiness to relinquish development rights to the undeveloped portion of the KG-D6 block and has now lodged a strong protest against the government move to take back the lease rights of a major portion of the offshore gas field, including an area containing five gas discoveries.

The company had voluntarily offered to relinquish an area of 5,367 sq km area of a 7,645 sq km in the eastern offshore KG-D6 block but the petroleum ministry had, on 28 October, ordered RIL to surrender 6,198.88 square km, 15 per cent more than what RIL had offered to surrender.

The excess area being taken away holds five discoveries - D-4, D-7, D-8, D-16 and D-23 - with 0.805 trillion cubic feet of gas reserves, or about one-fourth of the restated reserves in the producing Dhirubhai 1 and 3 (D1&D3) fields in the KG-D6 block, and is worth $10 billion.

Reliance now says the decision was a breach of the production sharing contract (PSC). In a letter despatched to the petroleum ministry on 11 November, RIL president and COO B Ganguly expressed surprise at the order when the field development plan (FDP) and the application for issuance of the petroleum mining lease for the five discoveries was under consideration of the government.

The five discoveries, according to him, are non-associated natural gas finds, and the company was entitled to retain as a discovery area under the PSC.

RIL also claimed that it had followed all timelines prescribed in the PSC and that it had submitted the proposal to declare the finds commercial as also the FDP for the five finds along with four others on 14 July 2008, well within the stipulated three years.

RIL said the Directorate General of Hydrocarbons (DGH) had communicated that the discoveries were unviable at the current price of $4.2 only on 31 March 2009, as against the PSC stipulated timeline of deciding the issue within 180 days from the submission and 90 days from receipt of additional information.

"The DGH evaluation using a gas price of $4.2 per million British thermal units ignored the fact that the gas price of $4.2 was valid only until 31 March 2014, and that the competitive arm's length or market price for gas might increase," Ganguly said.

RIL said it had since submitted an optimised field development plan on 19 December 2009, for four out of the nine discoveries and left the rest for being tied up at a later date.

RIL said the original FDP of July 2008 for the five finds was still valid and had not been withdrawn and the DGH assertion that no development plan was submitted for D-4, D-7, D-8, D-16 and D-23 was not true.

Meanwhile, RIL and its partner BP Plc are planning to revive their flagging fortunes in the eastern offshore field by pumping up overall gas volumes by about 5 per cent.

The combine is reported to have nearly completed drilling a new well in the MA oil-and-gas field, which is expected to produce around 2 mcmd (two million cubic metres per day) of gas.