Petroleum ministry moving cabinet to allow RIL retain gas finds

The oil ministry is moving a cabinet note seeking to allow Reliance Industries retain three gas discoveries, worth $1.45 billion, in the eastern offshore KG-D6 block where gas production has been held up even after expiry of the deadlines.

RIL has not submitted a development plan for D-29, 30 and 31 gas discoveries, which hold an estimated 345 billion cubic feet of reserves, within the prescribed period and is now in dispute with the petroleum sector regulator DGH over tests required to confirm the company's claims before production can start.

Technically, the petroleum ministry can cancel the licence granted to RIL and retender it, but the ministry feels that taking away the discoveries and rebidding the finds may lead to further delay in production.

The three finds, worth $1.45 billion at current gas price of $4.2 per million British thermal unit, can be quickly put on production by RIL using existing infrastructure as well as those being developed.

Sources said the ministry is moving the Cabinet Committee on Economic Affairs (CCEA) for relaxation in the Production Sharing Contract (PSC) deadlines to help RIL monetise the finds.

The oil ministry is seeking comments from the ministries of finance and law besides the Planning Commission before taking it to the CCEA for approval.

The move also takes into consideration the arbitration process currently under way, which has already led to a delay in production and extra cost associated with the arbitration.

Sources said RIL will have to conduct DGH prescribed Drill-Stem Test (DST) on D29, 30 and 31 discoveries and only half of the 493 million in costs it claims to have incurred will be allowed to be recovered.