DGH directed to take action as per notice issued to the contractors

Refusing to buy the argument by Reliance Industries (RIL) on the KG-D6 block cost recovery issue, the Petroleum and Natural Gas Ministry has directed the Directorate-General of Hydrocarbons (DGH) to take necessary action as per the notice served on RIL and ensure compliance of directives given to the contractors in the said notice.

At the same time, the government has moved ahead on the issue of appointing an arbitrator for the case and is learnt to have sent the file pertaining to this to the Law and Justice Ministry for concurrence. “The government has nominated an arbitrator after holding consultations with the former Solicitor General, Gopal Subramanium, on the issue. The notice sent to RIL, NIKO and BP was vetted by Mr. Subramanium. We have sent the proposal for the approval of the Law Ministry,” a senior Ministry official said.

At the same time, the Ministry has instructed the DGH to take further necessary action as per the notice given to the contractors — RIL, NIKO and BP — as being the nominee of the Government in the management committee (MC) and also ensure compliance of the directives given to the contractors in the said notice.

The government, through its notice dated May 2, has informed the contractors that they were not entitled to recovery of costs incurred for the excess capacity created in block KG-DWN-98/3 and such recovery of costs had to be limited only to the extent of the infrastructure used by them for the production of gas, and accordingly, the costs were inadmissible. Further, the Ministry had directed the parties to comply with the approved amended initial development plan (AIDP) to meet the targets with respect to the committed gas production rates and to forthwith submit to the government a detailed plan providing the timelines/steps to remedy the default and adhere to the AIDP.

The Ministry has directed the DGH to ensure that the directive issued by the government to the contractors is complied with immediately. “Without prejudice to the foregoing, the government, by this letter, directs you to comply with the approved amended initial development plan (IDP) to meet the targets with respect to the committed gas production rates and to forthwith submit to the government a detailed plan providing the timelines/steps you plan to take to remedy the default and to adhere to the amend IDP.”