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… for 2012-13, the Petroleum Ministry has moved the Law Ministry, Petroleum Secretary Vivek Rae told journalist here.

“We have already issued notice to RIL for a $1.005-billion penalty for shortfall in production during 2010-11 and 2011-12,” he added. RIL has moved the Supreme Court seeking initiation of arbitration proceedings against imposition of this penalty.

Petroleum Minister M. Veerappa Moily has come under attack from the Opposition, including CPI MP Gurudas Dasgupta, for trying to derail the arbitration proceedings in order to benefit the corporate house at the cost of the public exchequer.

“For 2012-13, we are examining what needs to be done, whether the higher penalty is to be imposed and if so in what manner. We are seeking the advice of the Law Ministry right now,” Mr. Rae said

The DGH in July recommended to the Petroleum Ministry that $781 million of the cost RIL had incurred in KG-D6 fields be disallowed for producing only an average of 26.07 mmscmd (million metric standard cubic metres per day) of gas as against the target of 86.73 mmscmd in 2012-13. This will be in addition to $1.005 billion in cost recovery.

The arbitration proceedings have been hanging fire for more than a year now as the two arbitrators appointed by RIL and the government are yet to agree on a neutral presiding judge for the proceedings. As the previous penalty notices invited arbitration proceedings, the Petroleum Ministry decided to seek legal opinion from the Law Ministry.

The Comptroller and Auditor-General (CAG) and DGH criticised RIL for not drilling its committed quota of wells, resulting in the fall in production and a large chunk of production facilities lying unused or under-utilised.

The Petroleum Ministry in May 2012 slapped a notice on RIL disallowing $457 million in cost till 2010-11 and $1.005 billion till 2011-12.

The average gas production from KG-DWN-98/3 (KG-D6 block) during the current year should have been 86.92 mmscmd as per the approved field development plans for D1, D3 and MA fields in this block, which are currently on production.

The output has dropped after hitting a peak of about 62 mmscmd in August 2010. The production has fallen as half of the wells of D1&D3 and a third of those in MA field have shut down due to water loading/sand ingress.

The DGH had stated that after cost disallowance, RIL would be required to pay $114 million in profit to the government for 2012-13 in addition to $103 million that was already due.