The near-doubling of gas prices to $8 per million British thermal units that will kick in from next month will accrue to all producers in the country.
Gas price hike seems to be a distant dream for Reliance Industries and its partners--Niko Resources and BP.
Natural gas output from KG-D6 in the week ended June 24 dropped to 30.82 mscmd from 31.57 mmcmd in the beginning of the month, according to a status report filed by the company with the Oil Ministry.
CAG had in its previous reports slammed Oil Ministry and its technical arm DGH for not exercising enough control and vigil over KG-D6 block.
The ministry has attributed the fall in output to non-fulfilment of RIL's commitment to drill 22 wells in the field.
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Reliance Industries' eastern offshore KG-D6 oil and gas fields have seen output further dipping to 44.5 million standard cubic metres per day this month.
According to an official close to the development, in the coming financial audit report, to be tabled in Parliament's Budget session next year, CAG will detail the slide in the government's share in petroleum sector profits due to a drop in gas production.
Reliance Industries and its partner BP Plc on Thursday won approval to invest $3.18 billion in R-Series gas field in the flagging KG-D6 block.
RIL and ONGC on March 28 agreed to appoint neutral international expert to decide if four wells drilled on boundary of KG-D6 block were drawing gas from neighbouring gas discoveries of the state-owned firm.
The list includes CAG's request dated July 2, 2012 for information on award of contract for laying of a 1,395-km pipeline by Mukesh Ambani-owned Reliance Gas Transportation Infrastructure Ltd for shipping KG-D6 gas from east coast to the west.
Sources said the Cabinet had in December last year stipulated that the new gas rate will apply to all producers excepting eastern offshore KG-D6 block where the contractor, which is fighting government against levying penalties for output shortfall, will have to give bank guarantees equivalent to the incremental revenue it would get from the new rates.
A market-based gas pricing regime is to kick-in from next month.
Reliance had committed to drill 22 wells in the Dhirubhai-1 and 3 fields or D1, the largest of 18 gas discoveries in the block KG-DWN-98/3 or KG-D6 block in the Bay of Bengal, by April 2011 to produce 53.4 million standard cubic meters of gas per day (mscmd).
The Directorate General of Hydrocarbons (DGH) last month wrote to Reliance asking it to drill two more wells by April to meet its commitment of drilling 22 wells in the phase-1 development of the Dhirubhai-1 and 3 or D1 and D3 gas fields in the KG-D6 block, official sources.
The company will invest $747 mn to increase production from D1, D3 and MA fields.
The projected output will come from satellite fields in the eastern offshore KG-D6 block as well as North East Coast block NEC-25, off the West Bengal coast.
The government had in May last year disallowed $1.005 billion expense of RIL on the flagging KG-D6 gas fields for not implementing the approved field development plan.
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RIL's Dhirubhai-34, or R-Cluster field, in the flagging KG-D6 block was to produce about 13 million standard cubic metres per day of gas, equivalent to present day output from D1&D3 as well as MA fields, by 2017-18.
Mukesh Ambani's Reliance Industries (RIL) might be denied a higher gas price from its D1 and D3 fields until the arbitration process with the government is over and a third-party expert report on the fall in output at the KG-D6 block is out.
RIL may go to arbitration which may lead to further delay in production and extra cost associated with the arbitration.
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Reliance Industries has put the cost of producing natural gas from its prolific Krishna Godavari basin fields at $2.9 per million British thermal unit and the firm will earn a pre-tax return of 13 per cent.
The Cabinet on Thursday decided to allow Reliance Industries to almost double the price of natural gas from April provided the firm gave a bank guarantee to cover its liability if gas-hoarding charges are proved.
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The Mukesh Ambani-led Reliance Industries Ltd (RIL) might take a write-down on the KG-D6 block.
The commission asks for notification to be deferred; RIL's KG-D6 pricing issue may return to Cabinet
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The committee said whatever benefit RIL received in terms of the migrated gas is liable to be returned to the government.
They also voiced concerns over a double penalty being sought to be imposed on them for KG-D6 fields output not matching targets.
The Oil Ministry is seeking Cabinet nod to allow Reliance Industries to retain three gas discoveries worth $1.45 billion in the eastern offshore KG-D6 block even after expiry of timelines.
According to a source close to the development, the government is set to come out with a notification in this regard by the end of this week.
