It has proposed that new pricing rules will not come into effect for KG D6 gas fields from April 2014 till independent experts verify reasons for decline in production

Notwithstanding the fact that it has admitted that Reliance Industries Limited (RIL) had violated the production sharing contract (PSC), did not drill the required number of wells that it had committed under the Amended Initial Development Plan (AIDP) and was penalised for decline in gas production, the Petroleum Ministry is now going all out to give relief to RIL in total disregard of the opinion of independent experts.

In a note to the Cabinet Committee on Economic Affairs (CCEA), likely to come up before the Cabinet next week and accessed by The Hindu, the Ministry has proposed that new gas pricing guidelines will not come into effect for KG D6 gas fields from April 2014 till independent experts verify the reasons for the decline in production.

Interestingly, the note ‘admits’ that the reserves in respect of the D1 and D3 discoveries were evaluated by reputed international consultants engaged by the contractor and cross verified by the Director General of Hydrocarbons (DGH) through another expert.

The DGH appointed international reservoir expert P. Gopalakrishnan in 2011 to review the performance of KG D6 and in his report, he blamed RIL for the fall in production from the field owing to non-drilling of adequate number of wells as per the AIDP, the note has pointed out.

It has also stated that the DGH has so far not agreed to the rationale given by the contractor (RIL) on the decline in production and hence production targets and estimates of reserves agreed under the AIDP and field development plan (FDP) are still valid under the PSC. “Despite several reminders by the DGH, the contractor has not completed the commitments made under AIDP/FDP,’’ states the note.

“There is disagreement between the contractor and the DGH on reasons for shortfall volumes. The reserves and the production profile on the basis of these reserves, as approved in the AIDP, were vetted by independent consultants on behalf of the contractor and the DGH and have not been revised by the management committee (MC). Revised field development plan (RFDP) submitted by RIL, proposing downgrade reserves from 10.03 TcF (trillion cubic feet) to 3.41 TcF has not been approved by the DGH so far. The DGH has called for additional evidence in support of contractor’s contention about lower reserves,’’ the note notes.

The DGH/Petroleum Ministry are yet to accept the contractor’s contention that the fall in production is not due to default in the implementation of the AIDP.

However, ignoring the recommendations of Mr. Gopalakrishnan and also by international experts Mustang Engineering, the Ministry in the same vein, batting for RIL, states that RIL be denied gas prices under the new guidelines from April 2014 onwards till such time the government decides that shortfall quantity is due to geological reasons and not due to “default on RIL’s’’ part in failing to fulfil the works programme commitments made under “the AIDP, the note adds.

“The reports of two international independent experts in the past, appointed by the Petroleum Ministry, have blamed RIL for failure to carry out activity outlined in the AIDP/FDP. The DGH has recommended penalty to the tune of $1.5 billion and $781 million for 2010-11 and 2011-12 on RIL. Then what is the need to appoint new independent reservoir experts? It is a clear case of the Petroleum Minister trying to bail out RIL and ensure they are not penalised for committing a fraud on the nation and the national exchequer,’’ CPI MP Gurudas Dasgupta said.