The Petroleum Ministry on Tuesday said it was not convinced by the arguments put forth by the Reliance Industries-led consortium that output in the D6 block cannot be increased.

Speaking at the Economic Editors conference, S. Jaipal Reddy, Minister for Petroleum & Natural Gas, said: “We are not convinced (on geological complexity). The Directorate-General of Hydrocarbons is also not convinced.”

Though the Ministry is concerned about the country's declining gas output, which was 9 per cent lower in 2011-12 than last year mainly because of the steep decline in output from Reliance fields, it feels the situation can be corrected.

Geological complexity

The Reliance-led consortium has informed the Ministry that it will not be able to produce as much gas as promised because of ‘geological complexity’. “This is being examined,” Reddy said.

Asked whether the consortium’s field can be exhausted in the next five years, Petroleum Secretary G.C. Chaturvedi said: “That is their fear.” According to reports, Morgan Stanley had said on Monday that the field could be exhausted in five years.

The consortium has discovered a new area (MJ1) in the existing producing gas fields that could hold significant potential. It has written to the Petroleum Ministry to allow it to move forward in drilling.

Reliance-BP-Niko, partners in the D6 block, have been facing flak for the continued drop in output from D-1 and D-3 gas fields and MA oil and gas fields in the block. After hitting a high of 60 mmscmd in end 2009, today the gas output from D-1 and D-3 is 21.4 mmscmd and from MA fields 5.5 mmscmd (a of 26.9 mmscmd).

On gas pricing and allocation, the Minister said: “This is an issue to be considered by the Empowered Group of Ministers. As of now, we are not considering any increase in price of gas before 2014.” However, the Ministerial panel can re-visit the issue, Reddy said.

Gas pricing

In fact, Reliance and its partners have been accused of not doing enough to increase output till the Government raises the gas price. At present, D6 gas is being sold at $4.2/mmBtu (landfall point) and is valid till 2014. On the coal-bed methane gas pricing proposals of Reliance and Essar, the Minister said the Prime Minister’s Economic Advisory Council Chairman, C. Rangarajan, has been asked to look into it.

(This article was published on October 9, 2012)
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