Regulator for $1.8 b penalty on RIL for D6 shortfall

Our Bureau New Delhi | Updated on August 07, 2013 Published on August 07, 2013

The Directorate-General of Hydrocarbons (DGH) wants to penalise Reliance Industries Ltd more for the continued shortfall in natural gas production from the D6 block in the Krishna-Godavari Basin.

On August 1, the regulator told the Petroleum & Natural Gas Ministry that “an amount of $1,786 million (or $1.8 billion) may be considered for cost disallowance due to continued production shortfall…”

It remains to be seen whether the Ministry will levy the penalty on RIL or not. After the Ministry slapped its first penalty notice in 2012-13, the explorer invoked arbitration.

Earlier, the nodal ministry had slapped a penalty of $1.005 billion (till March 31, 2012) by disallowing cost recovery for production facilities built by the private explorer to evacuate gas from the D-1 and D-3 wells.

The DGH recommended the penalty for the same reasons as in the previous years wherein $1.786 billion was considered for “cost disallowance due to continued production shortfall”.

Currently, RIL and its partners, BP and Niko Resources, are producing around 14 mmscmd, whereas infrastructure has been erected to handle output up to 80 mmscmd. According to the initial estimates, the KG-D6 fields should have been producing about 86.92 mmscmd by now.

But the gas output started dropping after hitting a peak of 62 mmscmd in August 2010.

Until now, the private explorers have spent $5.768 billion in developing the D1 and D3 fields.

Also, the companies spent $1.74 billion to develop smaller fields in the same block, known as MA. Moreover, $1.774 billion has been incurred as production expenses or operating costs.

Published on August 07, 2013
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