Parliamentary Panel for strict penalty provisions in oil and gas contracts

Our Bureau New Delhi | Updated on December 22, 2011 Published on December 22, 2011

A Parliamentary Panel has called for stringent provisions in the production sharing contracts (PSCs) to prevent any breach in approved oil and gas output targets by the operating companies.

In its Action Taken report on Demands for Grant (2011-12) tabled in Lok Sabha on Thursday, the Standing Committee on Petroleum & Natural Gas, “expressed surprise” that there were no specific penalty stipulations in the PSC in case of shortfall in achieving the production targets envisaged either in the approved field development plan or annual work programme and Budget. This, according to the Panel, gave the operators an escape route.

It also noted that the significant shortfall in the production target of gas by operators of Krishna Godavari Basin D6 block, Reliance Industries, was due to the less number of wells drilled in D-1 and D-3 gas fields. The committee wanted to know the penalty imposed on these companies for their failure to achieve the approved drilling target.

On the Ministry's response that there are no specific penalty stipulations in the PSC for the same, the panel said it would like to know how this important aspect was overlooked while framing the PSC by the Ministry/Directorate General of Hydrocarbons. “Keeping in view the large scale dependence on natural gas as fuel, the unscheduled cut in its production has adversely affected the plans of various important sectors of economy including the priority sector,” the report said.

“The committee, therefore, desires the Government/Directorate-General of Hydrocarbons to review the production sharing contracts entered with various operators and incorporate stringent provisions therein for breach in approved plan by the operating companies,” the report said.

The panel also said it would like to know the findings of the Directorate General of Hydrocarbons relating to well-wise performance analysis to ascertain the reasons of decline in gas production from existing wells of D6 fields.

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Published on December 22, 2011
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