Rejecting the plea by Reliance Industries Limited (RIL) to exit from the two coal bed methane (CBM) blocks in Barmer and Jalore districts of Rajasthan, the Directorate-General of Hydrocarbons (DGH) has initiated proceedings against RIL for recovery of costs for its failure to finish the minimum works programme (MWP) in the two blocks.

RIL had made a plea to the Petroleum and Natural Gas Ministry for surrendering the two blocks BS (1)-CBM-2003/11and BS (2)-CBM-2003/11 operated by it. However, the DGH, which had been sitting on the matter since February 2010, had recommended that if RIL wanted to relinquish the two CBM blocks, it had either to complete the Phase-II MWP and exit or surrender or pay the government an equivalent amount for the unfinished/balance work of Phase-II MWP and exit.

In his directions to the DGH, S. K. Chitkara, Under Secretary in the Petroleum and Natural Gas Ministry has stated that “The DGH should calculate/charge the cost of unfinished work programme as per Article 5.10 of the contract for the above mentioned blocks and the same principle should be applied uniformly for calculation of cost of unfinished work programme for all the CBM blocks.”

In its submission, the Under Secretary, Jasbir Singh, had mentioned on April 11 that the “Exploration Division has mentioned that in the contract, there is no provision for relinquishment of block from the retrospective date. Since the operator has entered Phase-II, it is binding on the operator to complete the MWP of Phase-II or relinquish the block by paying the equivalent amount of unfinished work programme in Phase-II as per Article 5.10. The proposal has been further examined by the Exploration Division and they are of the view that the DGH should charge the cost of unfinished work programme as per Article 5.10 of CBM contract. However, it has been mentioned by the DGH that it is not possible for it to calculate/charge the cost of unfinished work programme.”

Further, it said the Exploration Division should issue clear-cut instructions to the DGH to calculate and recover the cost of unfinished work programme from the operator (RIL) as per relevant Article of the CBM contract and as per policy guidelines, if any, on the subject, without any further delay.

According to Article 5.10, the contract shall undertake to complete the MWP agreed upon in each phase in accordance with Article 5.2 and 5.5, as the case may be. In the event that the contractor fails to fulfil the said MWP by the end of the relevant phase or the extended period, if any, or contract is terminated in accordance with Article 27, the contactor shall pay to the government within 60 days, following the end of the relevant phase or the extended period, if any, as the case may be, an equivalent amount for the unfinished/balance work, when evaluated in terms of MWP agreed upon, in accordance with modern CBM/oilfields and petroleum industry practices, reduced by the amount of the bank guarantee referred to in Articles 26.1(a) and 26.2.

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