In a stern step, the Government on Wednesday directed Reliance Industries ltd (RIl) to give up 81 per cent of its KG-D6 gas block, including five discoveries after the time given to the Mukesh Ambani-led entity to start production from these reserves, had run out.
"I think the notice (for relinquishment) has gone. If it hasn't yet gone, it will go today (October 30). We plan to send them the notice today," Petroleum Minister M Veerappa Moily said while speaking to media persons.
The Petroleum Ministry wants RIl and its partners BP plc of UK and Canada's Niko Resources to give up 6,198.88 square kilometres out of a total 7,645 sq km area in KG-D6 block, by retaining only the portions where regulator DGH-recognised discoveries have been made.
The area sought is more than 5,367 sq km area that RIl had offered to relinquish and includes five discoveries - D4, D7, D8, D16 and D23 for which the Directorate General of Hydrocarbon (DGH) had opined that RIl missed deadlines for submission of investment plans.
"We discussed the issue threadbare and after analysing it have reached the conclusion that they (RIl) need to relinquish certain area as per the Production Sharing Contract (PSC)," Moily said, adding that "we have followed a transparent process where we gave them due opportunity to present their case".
The five discoveries hold 0.805 trillion cubic feet of reserves, or about one-fourth of the restated reserves in the currently producing Dhirubhai-1 and 3 (D1&D3) fields in KG-D6 block, and are worth $10 billion at current imported cost of gas.
Also, the Oil Ministry will be moving Cabinet soon to deny the new $8.4 per million British thermal unit price for gas from D1&D3.
This would be done on the grounds that fall in output to 10 million standard cubic metres per day from 54 mmscmd achieved in March 2010, instead of rising to projected 80 mmscmd, was due to RIl's failure to drill the requisite number of wells.
"The gas pricing note to the Cabinet will go shortly," he said.
RIl will be allowed the new price only if its arguments of geological complexities being responsible for the fall in production are proved. This is the second penalty that is being sought to be imposed on RIl. The ministry has already moved to deny USD 1.8 billion of its cost for the same reasons.
The Ministry has, however, not indicated how it will compensate RIl for the period when it is forced to sell gas at $4.2 rate if it is proved at alater date that the company had not deliberately suppressed the output.
Officials said the 1,4462.12 sq km area that the Ministry is allowing RIl to retain includes the currently producing D1&D3 gas fields and D26 (MA) oil and gas field.
Besides, a cluster of four satellite fields (D2, D6, D19 and D22) and two other significant discoveries (D42 and D34) for which investment plans have already been approved, are also being allowed to be retained by RIl.
The area allowed to be retained also includes three yet-to-be-confirmed discoveries of D29, D30 and D31 with 0.345 Tcf of reserves, as Moily felt DGH had been unfair in denying their existance. Moily agreed with RIl's contention that the company should be allowed to conduct tests to confirm the three finds.