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In an unprecedented move, the Oil Ministry has sanctioned taking “scrupulous” action against Reliance Industries for natural gas output from its KG-D6 fields falling below the target.
Contrary to the Production Sharing Contract (PSC), the Ministry has decided to disallow expenditure incurred in constructing production/processing facilities at Dhirubhai-1 and 3 gas-fields in KG-D6 block that are currently underutilised/have excess capacity because of falling output.
Sources privy to the decision, taken by the Ministry earlier this month, said that based on the Solicitor-General's opinion, which was concurred by the Law Minister, Mr Salman Khurshid, $1.85 billion — of the $5.694 billion investment already made — will be disallowed and arbitration initiated to recover that from RIL.
The Oil Minister, Mr S. Jaipal Reddy, on November 9 instructed that “scrupulous” action may be taken against Reliance Industries.
Subsurface issues such as fall in pressure and water ingress have led to a fall in output at D1 and D3 from 54 million standard cubic metres per day, achieved in March 2010, to under 35 mmscmd currently, instead of rising to the targeted 61.88 mmscmd.
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