Reliance Industries Ltd may not get permission for its development proposals of the KG-D6 block until it allows an audit by the Comptroller and Auditor General of India (CAG), government sources said today.
The KG-D6 block is operated by RIL along with UK’s energy major BP and Canadian firm Niko.
The falling gas production from KG-D6, India’s largest gas field, has left everyone worried. Production has fallen to about 26 million units a day (mmscmd); peak production of 62 mmscmd was achieved in March 2010.
Sources told NDTV that the Prime Minister’s Office (PMO) recently called for a meeting to take stock of the situation of the oil and gas sector, but what dominated the meeting were the issues with KG-D6.
Top PMO officials, who did not want to be named, told NDTV that Petroleum Secretary G.C. Chaturvedi apprised principal secretary in PMO, Pulok Chatterjee, about the “issues pertaining to KG-D6” and “apprised the status of production in the KG-DWN-98/3 (KG-D6 gas block) and contractual issues related to it”.
Sources added that in the meeting “it was noted that the production has been continuously declining in the field since 2010-11”. The petroleum secretary apprised the PMO that the management committee, which oversees the development of the gas block, “has agreed to all development proposals made by the contractors”. However, the finalization of the decision is pending due to the contractor’s (RIL, BP and Niko) refusal to allow audit by CAG.
Earlier, petroleum ministry officials have always maintained that the permissions for further development of KG-D6 has been given to RIL, regardless of the pre-condition of CAG audit. Sources say this is the first time that the ministry’s pre-condition for approval to RIL for KG-D6 has been documented in a top-level meeting.
Another official, who spoke on condition of anonymity, said that the other issue that came up in the PMO meeting was the issue of price revision of KG-D6 gas. The price of KG-D6 gas was fixed at $4.2/unit (mmbtu) by the empowered group of ministers (EGoM) in 2010 for five years, expiring in March 2014.
For the price revision issue, it is learnt that Mr. Chatterjee “required that the process of price discovery may be allowed as per the provision of the production-sharing contract (PSC)”. Readers may recall that NDTV first reported that the petroleum ministry has already floated the EGoM note for consultation with other ministries for whether the price can be revised before 2014 or not.
RIL has submitted a gas price formula and said the price needs to be linked to international crude prices. RIL had earlier also proposed a price hike of more than $10 at $14.2-14.5/mmbtu. RIL has given the price referring to the price discovery for coal bed methane.
Now with the recent developments in PMO, all the power and fertilizer units in the country will be keenly looking at the next move of the government. Both the supply and price will have a big impact in both the two sectors.
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