The Petroleum and Natural Gas Ministry is not in a rush to reply to the letter of Mukesh Ambani-owned Reliance Industries Ltd. (RIL), seeking initiation of arbitration proceedings against the government move to limit the cost the company can recover from the expenditure incurred in the KG Basin D-6 block, Minister of State R.P.N. Singh said here on Monday.

Talking to journalists after announcing the holding of the third India-Africa Hydrocarbons Conference in New Delhi on December 9 and 10, Mr. Singh said, “We have got a letter from RIL. Whatever issues have been raised, we will study and whatever needs to be done, will be done.''

The Petroleum Ministry has already indicated that it will initiate action against RIL for not only digging the required number of wells in the Dhirubhai-1 and 3 gas fields but also for continuing fall in gas production that has gone down to 34 million metric cubic metres a day against the target of 61.88 mmcmd. It said it would limit the amount of expenditure it was allowed to recoup. “We are clearly not rushing into arbitration. We will look into the issues raised by RIL,'' Mr. Singh said.

Meanwhile, Additional Secretary, Ministry of Petroleum and Natural Gas, Sudhir Bhargava, said RIL had not slapped any kind of ‘arbitration notice' on the Ministry but had merely sent a letter.

Mr. Singh said the fall in gas production was a cause for concern and punitive action was being considered as one of the actions. In its November 24 notice, RIL had stated that restricting cost recovery — now at 100 per cent — in proportion to the gas output was against the production sharing contract (PSC) it had signed for the KG-D6 block in 2000.

Further, Mr. Singh said the country's refining capacity would rise by over 22 per cent to 238 million tonnes by 2013 from the present 194 million tonnes after new refineries at Paradip in Odisha and at Bhatina in Punjab were commissioned.

At present India has surplus oil refining capacity, with fuel demand pegged at 141.785 million tonnes in 2010-11. The fuel demand is projected to rise by 4-5 per cent annually during the XII Plan (2012-17).

Indian Oil Corporation is building a 15-million tonnes refinery at Paradip in Odisha, while Hindustan Petroleum Corporation is constructing a 9-million tonnes unit at Bhatinda in Punjab. “India is the world's fourth-largest oil importer, with oil and gas constituting 45 per cent of the country's primary energy basket. About 78 per cent of India's petroleum consumption is met through crude oil imports, while about 25 per cent of natural gas consumption also comes from imports,'' he added.

“India has been following a policy of consciously diversifying its sources of crude oil imports so as to reduce its dependence on any particular region of the world. Today, 21.5 per cent (35.3 million tonnes per annum as against 22 million tonnes in 2004-05) of India's crude oil imports come from Africa, with the major suppliers being Nigeria, Angola, Algeria, Egypt, Cameroon, Equatorial Guinea and Sudan,'' he added.

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