With the Directorate-General of Hydrocarbons (DGH) already probing the sudden decline in gas output from the KG-D6 fields operated by Reliance Industries Limited (RIL), the Petroleum and Natural Gas Ministry gets ready to take tough action against the Mukesh Ambani-owned company for not adhering to the Field Development Plan (FDP).
Thanks to this decline, gas allocation to a host of customers, including non-priority sectors, has had to be curtailed by around 20 million metric standard cubic meters per day (mmscmd). KG gas is now being supplied only to the power, fertilizer, LPG and city gas sectors. Though this has affected RIL's immediate sales revenue, analysts say the company does not lose since gas prices — which are set by the government and are due for revision only in 2014 — are much lower than what RIL would like to see.
A three-member team lead by Gautam Sinha, head of production, DGH, is assessing and reviewing the well-wise production and reservoir performance of the KG-D6 fields. The Management Committee comprising Petroleum Ministry and RIL officials have held three rounds of talks on the continued decline in gas production without any concrete result. What has particularly irked the Ministry, senior officials told The Hindu, is RIL's refusal to drill more wells under the agreed pact.
Under contractual terms, RIL had to drill 22 wells by the end of April this year. However, it has drilled only 18 and did not complete the required number on the plea that as gas output was declining, there was no need to drill further. “We are seriously concerned about RIL's refusal to drill four more wells under the contractual terms. We are not going to sit back and watch the situation. We will take strong action against them if they fail to fulfil what they had promised,” said a senior Ministry official.
Ministry officials are also intrigued by the fact that RIL managed to strike a sweet deal, selling a 30 per cent stake in all its exploration blocks to BP for $7.2 billion even as it claims that the amount of gas in the overall structure is less than what it initially believed. “If RIL finds it is able to increase production when the price of gas is revised after 2014, people may ask whether BP, which invested billions, might have been privy to this eventual ‘re-discovery',” an official said.
In 2006, RIL had won a government award to invest $8.836 billion in Dhirubhai-1 and 3 (D1 and D3 fields) in its Eastern offshore KG-D6 Block after assuring production of 61.88 mmscmd of gas from 22 wells by April 2011 and 80 mmscmd from 31 wells by 2012. But a completely different scenario has emerged on the ground, with the D6 fields witnessing a drastic fall in gas output. Today, RIL is producing only about 42 mmscmd from the 18 wells drilled so far on D1 and D3 fields in that block. Another 8 mmscmd is being produced from an MA oilfield in the same block, taking the total output to around 50 mmscmd as against the 69.88 mmscmd committed by the company.
RIL says the output dipped after touching 61.5 mmscmd in March last year due to falling pressure in its wells and that drilling more wells will not solve the problem as it will only end up tapping the same resource.
In 2007, allegations of gold-platting — or inflating capital costs — were levelled against RIL when it claimed that the investment required for developing the D1 and D3 gasfields was $8.8 billion and not $2.47 billion initially proposed in 2004. Because of its revenue implications for the exchequer, the matter is under the investigation of the Comptroller and Auditor-General of India.