Oil ministry this week issued written instructions to the billionaire Mukesh Ambani-run firm to make a 'pro-rata' cut in gas supplies to all existing customers if the production from its KG-D6 field cannot support new customers, two sources with direct knowledge of the information have said.
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 slapped an arbitration notice challenging oil ministry's decision to take away 814 square kilometer of its eastern offshore KG-D6 area that contained five gas discoveries.
The proposed expansion of the Dabhol power project under Ratnagiri Gas & Power Pvt Ltd (RGPPL) by 2,100 Mw from the present capacity of 1,940 Mw has been stalled for want of assured gas supply from the KG-D6 gas field, operated by Reliance Industries Ltd, and adequate number of power procuring states.
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).
In its annual work program submitted to upstream oil regulator Directorate General of Hydrocarbons, Reliance stated that natural gas output from Dhirubhai-1 and 3 or D1 and D3 gas fields in the block KG-DWN-98/3 or KG-D6, will be about 38 mmscmd in 2012-13 from current production level of 43-44 mmscmd.
RIL said production capacity from KG-D6 has far exceeded the 40 million standard cubic meters per day (mmscmd), for which buyers have been tied-up, and has asked the government to immediately name customers for an additional 25 mmscmd so as to avoid irreversible damage to the field reservoirs.
They also voiced concerns over a double penalty being sought to be imposed on them for KG-D6 fields output not matching targets.
Reliance Industries' eastern offshore KG D-6 field's gas production will double to around 90 million standard cubic meters per day by next fiscal, government's background material for the Economic Editor's Conference said.
The petroleum ministry has said Reliance Industries Ltd (RIL) is not right in seeking an out-of-turn rise in the price of natural gas produced from the KG-D6 fields and asserted the $4.205 per million British thermal unit (mBtu) rate will prevail unless pricing formula is changed.
The beleaguered Dabhol power plant will from October 1 start buying natural gas from Reliance Industries to cut electricity generation cost at the nation's largest gas-fired unit.
Contract does not provide for retrospective penalty for 'such' acts
The length of the main trunk pipeline is 1,385 km from Kakinada to Bharuch and 75 km is the length of the spur lines.
An empowered group of ministers on April 9 decided to give any unutilised KG-D6 gas to steel plants who are currently not being supplied their full share of administered price fuel, official sources said. After gas-based steel plants, allocations would also be made to existing gas-fired power plants and to other power plants, including captive power plants depending upon the availability of the unutilised gas.
The petroleum ministry is mulling filing a defamation suit against an Anil Ambani Group firm for persisting with 'false claims' pertaining to government revenues from Reliance Industries KG-D6 fields.
CNG and piped cooking gas prices in cities such as Delhi and Mumbai may be hiked by 10-11 per cent next month as the government-dictated gas price is set to rise by about 76 per cent, ICICI Securities said in a report. The government, using rates prevalent in gas-surplus nations, fixes the price of natural gas produced by firms such as state-owned Oil and Natural Gas Corp (ONGC) from fields given to them on nomination basis, every six months. The next review is due on October 1.
RIL has been selling gas from KG-D6 at the same price since it started production in April 2009.
The Election Commission asked the government to defer announcement of the new price till completion of the polls and so RIL was asked to continue selling the gas at old rates.
Last week, RIL and urea companies failed to settle the key terms of gas supply from April 1 upon expiry of the five-year contracts that priced gas from the eastern offshore KG-D6 fields at $4.205 per million British thermal units.
With this, the total penalty on RIL for missing the target in four fiscal years beginning April 1, 2010 now stands at a cumulative $2.376 billion, the Minister informed the Lok Sabha on Tuesday.
"The letter approving a price of $4.20 per million British thermal unit (mBtu) for first five years of production from KG-D6 was issued by the Petroleum Ministry on Thursday," a source familiar with the development said.
Reliance in the first phase is developing Dhirubhai-1 and 3, the first two of the 15 discoveries in the 7,645-square- kilometre KG-D6 block. Initial output is likely to be 40 million standard cubic meters per day (mmscmd), which will rise to 60 mmscmd in 2009-10.
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.
The company is in advanced talks with Hindustan Petroleum Corp, Chennai Refinery and Kochi Refineries for sale of 34,000 barrels per day of oil it will start producing from the gas-rich KG-D6 block on Krishna Godavari basin from September. The company is investing $2.234 billion in developing the MA-1 and MA-2 oil fields in the predominantly gas-rich block.
CPM leader Tapen Sen has asked Prime Minister Manmohan Singh for a probe into what he called 'artifical inflation' in Reliance Industries' KG-D6 spend and the Mukesh Ambani-run firm's 'manipulation' of gas price.
RIL has more than half a dozen undeveloped discoveries.
Government had proposed a revised investment plan for the main gas fields in the KG-D6 block.
Oil and Natural Gas Corporation said on Tuesday it was making an annual loss of Rs 700 crore (Rs 7 billion) on sale of gas at administered prices even as Reliance Industries stated it followed a transparent process to discover the price of gas.
Reliance Industries Limited has made two natural gas discoveries on the east and west coast adding to the vast hydrocarbon reserves it has found in the past few years.
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.
An empowered group of ministers headed by Defence Minister A K Antony is to consider an Oil Ministry proposal of abolishing the priority ranking according to which natural gas is first given to urea manufacturing fertiliser plants, then to LPG units, followed by power plants, city gas, steel and refineries.
The department has proposed to pool prices of imported and domestically produced natural gas.
Gas pricing guidelines stipulate that a new gas price will apply to all producers except RIL.
The Directorate General of Hydrocarbons last month recommended to the Oil Ministry that $792 million of the cost RIL has incurred in KG-D6 fields be disallowed for producing only an average of 26.07 million cubic meters per day of gas as against the target of 86.73 mmcmd in 2012-13.
The government plans to impose an additional penalty of $578 million on Reliance Industries for producing less-than-targeted natural gas from its eastern offshore KG-D6 block.
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, 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.
Reliance concealed and did not reveal the data to ONGC.
ONGC and RIL bill their consumers like fertiliser plants and power stations in US dollar.
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