Economy

Arbitration may be the only way out for resolving D6 issues

Richa Mishra New Delhi | Updated on October 20, 2013 Published on October 20, 2013

Falling gas output, a contentious issue.

Technical differences between Govt, contractors remain

Petroleum and Natural Gas Minister M. Veerappa Moily’s optimism over resolving issues related to falling gas output from KG-D6 is not shared by the Reliance Industries Ltd-operated block’s oversight committee or management committee.

The committee stands divided over the issue of in-place reserves, relinquishment of area, and appointment of a third party consultant, among others, leaving arbitration as the only way out.

Though the contractors have the option of appealing to the Government if the committee remains divided, this may not yield results, as the Government has already disallowed cost recovery by the contractors and the matter is under arbitration, sources say.

The members of the committee, which consists of nominees of the Directorate General of Hydrocarbons (DGH), Government, and Reliance-BP-Niko, are yet to agree on the resolution of the meeting held on October 1, an official privy to the developments said.

The official told Business Line that the management committee resolution sent by the DGH had not been accepted by RIL.

The company and its partners have sent their own version of the minutes of the meeting to the DGH.

Justifying Moily’s statement of October 19, after his meeting with Bob Dudley, Group Chief Executive of BP, along with Mukesh Ambani, Chairman, RIL, that almost all their (RIL-BP) concerns have been resolved, except on gas pricing, an official said, “the Ministry may have decided on a plan of action internally, and therefore the Minister’s statement.”

On October 4, RIL, as the operator of the block, had sent its own version of the minutes of the meeting, according to which technical differences between the DGH and the contractors remained unresolved.

In light of the failure of the committee to reach an agreement on the technical aspects of the revised in-place gas volumes and ultimate recoverable reserves from D-1 and D-3 gas field, it had also requested for a third party consultant.

However, RIL’s request for an independent consultant to assess the reasons for the drop in output from its East Coast gas fields was rejected by the block oversight committee, according to the draft resolution sent to the contractors on October 5.

The DGH and the Government nominee have not accepted the arguments put forth by RIL and its partners for the steep drop in output from the D1, D3 fields in the KG D6 block.

The largest producing fields in the block (D-1 and D-3), due to technical snags, reported a significant decline in output after hitting a peak of 61 mmscmd in 2010, the contractors say. The output today stands at roughly 10 mmscmd.

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Published on October 20, 2013
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