While the government had in June approved a new formula for pricing of all domestically produced natural gas, the Cabinet yesterday allowed the same principles to also be applied to Reliance Industries' currently producing fields in KG-D6 block subject to certain conditions.
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For 2015-16, ONGC is targeting a total of 26 MT of oil production.
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The government will now examine the report and decide on how and to what extend should ONGC be compensated for its gas being produced by RIL.
RIL, its partner BP plc of UK will invest about Rs 6,000 crore (Rs 60 billion) by 2016 to help sustain and improve recovery from the two main gas fields.
Reliance Industries Ltd (RIL) said on Wednesday that the government's move to disallow it recovery of certain costs relating to the D6 gas block in the Krishna-Godavari basin (KG-D6) did not amount to a penalty and was also not in line with the contract the two had signed.
He added every dollar rise in the gas price will result in Rs 4,000 crore of revenue and Rs 2,300 crore in profit after tax.
Gas production from Krishna Godavari basin block has dropped to just over 12 mmscmd and RIL is carrying out workover on main Dhirubhai-1 and 3 gas fields.
RIL-BP, who are currently producing about 11.8 million standard cubic metres per day of gas from the flagging eastern offshore KG-D6 block, is targeting newer fields in KG-D6 block and gas discoveries in neighbouring north-east coast and Cauvery basin to raise output.
RIL has maintained it had followed the production sharing contract (PSC) in letter and spirit and done no wrong and it has drilled all wells within its boundary.
RIL and its partners BP plc of UK and Canada's Niko Resources plan to produce about 13 million standard cubic metres per day of gas for 13 years from D-34 discovery, known as R-Cluster, in the KG-DWN-98/3 or KG-D6 block by 2017-18.
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A report, by DeGoyler and MacNaughton, has put a question mark on the future production from the five ONGC discoveries.
The Cabinet Committee on Economic Affairs had first on June 27, 2013, and then on December 19, 2013, decided to price all domestically produced natural gas, including unconventional fuels such as coal-bed methane and shale gas, at an average of international hub rates and the cost of importing liquefied natural gas.
Government has put on auction the gas discovery area it snatched from Reliance Industries in KG-D6 block and the field that Cairn India is seeking to regain around its Rajasthan block.
BP, which bought a 30 per cent stake in RIL's 21 oil and gas blocks, including KG-D6, for $7.026 billion in 2011, is working with RIL to arrest the output decline in the fields.
Government had proposed a revised investment plan for the main gas fields in the KG-D6 block.
Earlier this week, the ministry had come out with a clarification, saying domestic gas producers had to stick to the earlier price of $4.2 a unit until a further notification from the new government.
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While the Cabinet has approved doubling of gas price from April 1 next year, Oil Ministry is proposing that old rates of $4.2 per million British thermal unit apply to gas from D1/D3 and MA fields in eastern offshore KG-D6 block till it proved that RIL had proved less than targets only because of geological factors.
RIL estimates output from KG-D6 could reach up to 60 mscmd in the next five years, when all satellite fields are brought into production.
RIL has been selling gas from KG-D6 at the same price since it started production in April 2009.
Oil and Natural Gas Corporation has deployed the best-in-class technologies in its Improved Oil Recovery and Enhanced Oil Recovery schemes on these fields.
The RIL stock has halved from an all-time high of Rs 1,626 made (intra-day) on January 15, 2008, to on Wednesday's closing figure of Rs 800.55.
RIL, which has faced numerous delays in getting approvals and shifting goal-posts, said the country did not have a stable policy regime and this was responsible for exit of global energy giants like Royal Dutch Shell, BHP Biliton of Australia, Statoil of Norway and Brazil's Petrobras.
In the 38-page report, across 10 chapters, RIL explained how it entered the exploration and production business; the history of the New Exploration and Licensing Policy and the introduction of production-sharing contracts.
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Oil and Natural Gas Corporation had in 2007 farmed out 15 per cent stake in the KG-DWN-98/2 block, which sits next to Reliance Industries' KG-D6 block, to Brazil's state-controlled oil firm Petroleo Brasileiro SA or Petrobras.
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If the EC decides to put on hold a gas price revision for RIL, it would set a precedent for pricing decisions of the government and policy decisions taken but undergoing procedural delays.
Energy conglomerate Reliance Industries and its partner BP plc on Friday said they have made a second deep-water gas condensate discovery in the Cauvery basin, off the east coast.
For India's upstream sector that has seen no new discovery coming into production.
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The Management Committee headed by Director General of Hydrocarbons R N Choubey refused to take a view on appointment of renowned reservoir consultants Ryder Scott, DeGolyer and MacNaughton, Gaffney, Cline & Associates or Netherland, Sewell & Associates to ascertain if RIL's claims of fall in reserves are actually true or the firm was hoarding gas by producing less, official sources said.
Gas pricing guidelines stipulate that a new gas price will apply to all producers except RIL.
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