The Petroleum and Natural Gas Ministry will come out with the guidelines on the bank guarantee to be furnished by Mukesh Ambani owned Reliance Industries Limited, its partners BP and Niko Resources in order to qualify to get the new enhanced gas price for KG D6 production from April 2014.
The note of the formulations of guidelines has also been moved by the Petroleum and Natural Gas Ministry within the Department and for inter-Ministerial consultations with the Law and Justice Ministry as well as Finance Ministry. “As soon as the comments are received from the concerned departments on the way and manner in which this has to be taken and notification issued, we will proceed accordingly. Most likely we plan to wrap up the issue by February 20, as stated by Petroleum and Natural Gas Minister, Veerappa Moily,” a senior official said here on Tuesday.
The Union Cabinet last month had given its nod to allow RIL and its partners to provide bank guarantees to settle any claim against it over a shortfall in its gas output. “Guidelines for submission of bank guarantee for D1/D3 fields will be finalised by February 10,” Mr. Moily said. The bank guarantee will be cashed if it is proved that the company had hoarded gas or deliberately suppressed production at the main Dhirubhai-1 and 3 (D1&D3) fields in the eastern offshore KG-D6 block since 2010-11.
The purpose of coming out with the guidelines is that it will lay the roadmap for what needs to be done with the money under the bank guarantee in case it is proved that RIL had deliberately held back gas production from the KG D6 facility in Andhra Pradesh. With gas prices likely to go up from $4.2 per million British thermal unit to somewhere between $8 to 8.4 mbtu after the Rangarajan pricing formula comes into effect from April 1, the bank guarantee for every trillion cubic feet of gas production will come to around $4 billion which will be shared by the three partners.
D1&D3, the first of the 19 discoveries in Eastern offshore KG-D6 block that was put on production in April 2009, originally was estimated to hold 10.03 Tcf of reserves. However, the estimates were slashed to 2.9 Tcf last year. Of the re-stated reserves of 2.9 Tcf, about 2.2 Tcf have already been produced in first four-and-half-years and balance of about 0.75 Tcf remains to be produced.
