Govt to look into reasons for fall in gas from Reliance fields

Going into an overdrive, the Government has called an official meeting next week to review reasons for the fall in production at Reliance’s KG—D6 fields, and has ordered the company to stop natural gas sales to non-priority users like Essar Steel.

A meeting of the Management Committee, that overseas the operations of the KG—D6 fields, has been called next week to “ascertain reasons” for RIL not meeting its drilling commitment and the drop in production, Oil Secretary, Mr S Sundareshan said here.

Reliance had in 2006 won government nod to invest $8.836 billion in Dhirubhai—1 and 3 fields in KG—D6 block after promising an output of 61.88 million cubic metres a day from 22 wells by April 2011 and 80 mmscmd from 31 wells by 2012.

But situation on ground has been markedly different with Reliance only producing about 42 mmscmd from 18 wells drilled so far on D1 and D3 field in the Bay of Bengal block. Another 8 mmscmd is produced from MA oilfield in the same block.

“A formal meeting has been called next week in which representatives of the oil ministry, the Directorate General of Hydrocarbons and the contractor (Reliance) will be present,” he said.

“After ascertaining the reasons, we will take appropriate measures.”

“These are fields which have come into production after monumental effort... we do not come to abrupt judgments on these matters,” he said when asked if the government was contemplating levying any penalty.

“It is difficult at this juncture to comment on why production has fallen (and) it is too premature to talk of action,” he said.

Mr Sundareshan did not elaborate on the “measures” the oil ministry would take, but sources said the Production Sharing Contract (PSC) does not provide for levying of any financial penalty on a firm not meeting its drilling commitment during production stage.

The PSC provides for levy of liquidated damages only in case a company does not meet the commitment it had made for getting the block. Penalty is levied for the part of the minimum work programme (MWP), committed at the time of bidding for the block, that is not completed.

KG—D6 wells have over the past one year shown increased water production and some of them are on the verge of ceasure. Also, there has been fall in pressure at the wells.

Mr Sundareshan said Reliance has been asked to immediately stop natural gas sales to Essar Steel, Welspsun Maxteel, Ispat Industries and petrochemical and refineries so that full demand of core sectors of fertiliser and power is met.

“There is no question of any contractor not abiding by government instructions,” he said adding Reliance would abide by the ministry orders within days.

COMMENT NOW