NEW DELHI : Reliance Industries (RIL) and its partners will have to shell out a penalty of Rs 1,700 crore to the government for producing less than the targeted natural gas from eastern offshore KG-D6 fields in 2015-16. The production-sharing contract (PSC) allows RIL and its partners BP Plc of the UK and Canada's Niko Resources to deduct all capital and operating expenses from the sale of gas before sharing profit with the government. The centre has claimed an additional $175 million as its profit share after the cost disallowance, said an official in Oil and Gas Ministry.
The total penalty, which is in the form of disallowing recovery of cost incurred for missing the target during six years beginning April 1, 2010, is now estimated at $3.02 billion.
RIL had previously stated that every year, based on its own interpretations of the PSC and assumptions the Ministry of Petroleum and Natural Gas revises the total cost it proposes to disallow and consequently aggregates the figure with figures of the previous years.
However, this has been rejected by the partners. They have also contended the demand for additional profit from petroleum as Government of India share. The partners have challenged the cost disallowance of the past years and have initiated an international arbitration seeking dropping of the same on grounds that the PSC does not provide for any such punishment.
The output from KG-D6 block has continued to drop in the subsequent years and is now below 4 million standard cubic metres per day. Gas production from Dhirubhai-1 and 3 gas field in the eastern offshore KG-D6 block was supposed to be 80 mscmd but actual production was only 35.33 mscmd in 2011-12, 20.88 mscmd in 2012-13 and 9.77 mscmd in 2013-14. RIL holds 60 per cent interest in block KG-DWN-98/3 or KG-D6 in Bay of Bengal, BP has 30 per cent and Niko has 10 per cent.
Drop in production
The production from Dhirubhai-1 and 3 gas field in the eastern offshore KG-D6 block was supposed to be 80 million standard cubic metres per day (mscmd) but actual production was only 35.33 mscmd in 2011-12, 20.88 mscmd in 2012-13 and 9.77 mscmd in 2013-14