RIL plans to invest $8-10 bn in KG-D6 block: Moily

Reliance Industries and its partner BP have proposed to invest $8-10 billion to further develop the D6 gas block of the KG-D6 block, off the east coast of India, by 2016-17, petroleum minister M Veerappa Moily said yesterday.

The statement came after Reliance Industries chairman Mukesh Ambani and BP Group chief executive Bob Dudley called on him in New Delhi today.

Both Reliance and BP, however, explained the visit as a routine interaction with the decision makers of the country.

The two also called on finance minister P Chidambaram, Prime Minister Manmohan Singh and Planning Commission officials.

BP-RIL, partners in the country's prolific KG-D6 block, have been facing challenges in convincing the oil sector regulator Directorate General of Hydrocarbons (DGH) on the reasons for falling output from the producing fields in the block.

The petroleum ministry also proposed penalties on Reliance Industries, the operator of the KG-D6 block, for expenditure on the block without achieving set targets.

In fact, natural gas output from the block has fallen to a trickle after investment of billions of dollars over the past few years.

While thye petroleum minister has offered to raise producer prices of natural gas despite the ministry's falling share from the gas block amidst allegations that RIL has been deliberately keeping output low in anticipation of a hike in gas price, the finance ministry has so far been opposing a revision of the production sharing agreement (PSA) with Reliance as it would further cut the government's revenue.

It is, however, not clear whether the proposed investment is additional to the budgeted spending on the block, where production has been steadily declining since 2010.

Natural gas output from the block, in which BP has a 30 per cent equity stake, has declined to 14 million cubic metres per day (mmscmd) from 60 mmscmd at the end of 2010.

The companies have cited geological complexities for the fall in output while the oil regulator believes they have failed to drill enough wells.