Parliamentary panel squarely blames RIL for drop in D6 gas output

The Parliamentary standing committee on petroleum and natural gas has squarely blamed Reliance Industries Ltd for failing to implement the government-approved plan for production of gas from the Krishna-Godavari D6 gas fields allotted to the company.

The panel today said the government should treat the failure as a contractual "default" and take necessary action.

The 'failure' to drill the committed 50 wells on the KG-D6 fields led to natural gas output falling drastically over the past three years, and the government should take appropriate action, the committee said.

"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 (petroleum ) ministry in this regard must be premised on 'default' by the contractor and not 'failure'," the panel said in its report tabled in Parliament today.

The panel, headed by Aruna Kumar Vundavalli, asked the ministry to "explore all possible options and take corrective measures to increase the natural gas production from KG-D6."

Mukesh Ambani's RIL has consistently claimed that the steep fall in output is due to technical factors beyond its control; but the Directorate General for Hydrocarbons (DGH) maintains that it is because the company has failed to dig enough wells in the Bay of Bengal basin.

The production based on the approved field development plan was to go up to 86.73 million standard cubic metres (mmscmd) a day in 2012-13 from 33.83 mmscmd in 2009-10; but production started declining after hitting a peak of 60 mmscmd in early 2010. The actual production in 2010-11 was 55.89 mmscmd, and 26.18 in 2012-13.

Both the ministry and upstream regulator DGH have advised RIL to take measures like drilling the committed quota of wells.

The government is irate because the failure of the wells has thrown its energy plans out of kilter.

An expert commissioned by DGH to study the decline in production concluded that reserves in the main KG-D6 fields are as estimated earlier (10 trillion cubic feet), and remedial measures will see production go up.

RIL on the other hand blamed unforeseen geological complexities, like water and sand ingress in wells and reservoir pressure dropping sharply, for the falling output. Based on production data, it lowered the reserves in the fields to one-third (3 tcf), which it says additional wells will not help recover.

"Based on the report (of the expert), a cost dis-allowance amounting to $1.005 billion has been imposed on the contractor (RIL), which the contractor has taken for arbitration," the report said.

The committee said it has taken serious note of the ministry's statement that RIL failed to adhere to the approved field development plan both in terms of gas production as well as drilling and putting on stream the required number of wells, even after repeated reminders.