Gopalakrishnan panel blamed RIL to for the fall in gas output

In a setback for Reliance Industries Limited (RIL) and the efforts of the Petroleum Ministry to bail out the Mukesh Ambani-owned company, the Director-General of Hydrocarbons (DGH) on Monday refused to endorse appointment of international experts to verify the reasons for the fall in production in the KG-D6 gasfields once again.

International expert R. Gopalakrishnan, at the instance of the Petroleum and Natural Gas Ministry Committee, already carried out a study of the gasfields and submitted a report in April 2011, blaming it on the RIL failure to drill the required number of wells.

However, the present Petroleum Minister has refused to recognise the findings and decided to go in for another validation of the KG-D6 blocks despite reservations expressed by the DGH and some sections of officials in the Ministry.

The Management Committee headed by DGH R. N. Choubey, at a meeting, refused to take a view on appointment of renowned consultants Ryder Scott, DeGolyer and MacNaughton (D&M), Gaffney, Cline & Associates (GCA) or Netherland, Sewell & Associates to ascertain whether RIL's claims of a fall in reserves are actually true or if the firm was hoarding gas by producing less.

The meeting, attended by senior officials including Aramane Giridhar, Joint Secretary (Exploration), S.C. Khuntia, Additional Secretary & Financial Adviser, and V.L.V.S.S. Subba Rao, Adviser (Finance), did not take a call on the issue, highly placed sources in the Ministry said.

The DGH and the Gopalarishnana Committee blamed RIL's failure to drill committed wells for the output falling by 80 per cent to 10 million standard cubic metres per day from D1&D3 fields, instead of rising to the planned 80 mmscmd (Million Metric Standard Cubic Metres Per Day). The DGH has already recommended levying of a $1.786-billion penalty for this on RIL.

Despite all adverse reports and recommendations from various sources, the Ministry has gone ahead and moved a Cabinet note for denying the benefit of gas price revision upon the expiry of the existing $4.2 per mbtu rate in April 2014. Batting for RIL, the note wants independent experts to once again look into the fall in gas production from the KG-D6 gasfields and if it is found that the reason was geological, then RIL will not be denied the new gas pricing regime for KG-D6.

Petroleum Secretary Vivek Rae told reporters here on Tuesday that a Cabinet note had been moved on this issue for inter-ministerial consultations. “It is going to the Cabinet for a final decision in a week or 10 days. The shortfall in gas production was around 1.19 Tcf (trillion cubic feet) in the past three years. Whether the shortfall is deliberate or not deliberate, this has to be decided by technical expert. Once the expert decides it was not deliberate, the new gas price formula will apply. If they decide it was deliberate, the formula will not apply,” he added.

Interestingly, Mr. Rae said the issue of appointment of international experts would have to be decided by the Ministry, and not the Cabinet.

However, RIL says gas reserves have dropped one-third to under 3 TcF due to previously unknown geological factors, and the undrilled quota of 11 wells would not increase production. While drilling of the remaining 11 wells would require over a $1.65-billion investment, the same reserves can be produced by spending around $0.5 billion in repairs and compression of the existing wells, it contends.

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