Taking a strong note of Reliance Industries ltd's (RIl) flagging output in KG-D6 fields, a Parliamentary panel on Tuesday asked the Government to treat the company not drilling committed number of wells in the aforementioned gas fields, as contractual ‘default’ and not just failure for taking remedial action.
Criticising RIl for the sharp drop in natural gas output from eastern offshore KG-D6 fields, the Standing Committee on Petroleum and Natural Gas in its report tabled in Rajya Sabha on Tuesday, told the Petroleum Ministry to explore all possible options and take corrective measures to increase production.
“Non-adherence by the contractor (RIl) to approved field development plan should be construed as ‘default’ and not just failure and remedial action by the Ministry in this regard must be premised on 'default' by the contractor and not on ‘failure’,” it said.
The Ministry told the panel that 50 wells were to be drilled as per the field development plan submitted by RIl to produce from about 10 trillion cubic feet of reserves in Dhirubhai-1 and 3 (D1&D3) gas fields in the KG-D6 block. But RIl drilled less than half of them, leading to output starting to decline from 2011-12.
The D1&D3 fields are producing tenth of 80 million standard cubic meters per day projected output in the development plan. The Petroleum Ministry, according to the report, has not accepted RIl’s contention that the decline in gas production was not due to default in implementation of the agreed field development plan but due to downgrading of reserves. The contractor has also reasoned the decline to substantial variance in reservoir behavior and higher pressure decline than envisaged.
However, the ministry has disagreed and disallowed $2.376 billion in KG-D6 cost up to 2013-14 for the same and RIl has challenged it and the matter is under arbitration.
The ministry said that all legally permissible steps will be taken to increase gas output from the block, and that termination of the contract was the last resort.