Reliance-BP to compensate gas purchasers for supply shortfall

Officials said peak output from R-Series is 12 mmscmd, while Satellites will produce another 7 mmscmd beginning mid-2021.

Published: 12th September 2019 04:55 PM  |   Last Updated: 13th September 2019 09:00 AM   |  A+A-

Reliance Industries Chairman and Managing Director Mukesh Ambani

Reliance Industries Chairman and Managing Director Mukesh Ambani (File Photo | PTI)

By Express News Service

NEW DELHI: With gas production starting to flag and output lagging supply commitments, Reliance Industries Ltd (RIL) is now offering to compensate gas customers for any shortfall in the contracted supply of natural gas from new fields currently under development. This is the first time the oil and gas giant is offering gas buyers such an assurance. 

The company and its partner BP have included the provisions as part of a Gas Sales Purchase Agreement (GSPA) released alongside a Notice Inviting Offer (NIO) seeking buyers for natural gas produced from its new R-Series fields. Part of the Bay of Bengal’s KG-D6 block, these fields are expected to begin production by mid-2020. 

“Sellers (RIL and BP) shall reimburse buyer as liquidated damages for the purchase of a quantity of gas equal to such shortfall quantity,” the GSPA said, adding that to be eligible to receive such damages, the buyer shall procure each replacement quantity on a competitive basis to reduce the purchase price; use its “best endeavours” to minimize damages; and provide sellers detailed documentary evidence of all costs, charges and tariffs claimed as part of such liquidated damages.

“The clause is a way to assure buyers that the gas they have contracted for reaches them, failing which they need not deal with operational difficulties but work on securing an alternate source of supply,” said a senior oil industry analyst. 

According to data, while RIL had committed to supplying as much as 60 million metric standard cubic metres per day (mmscmd) of gas from the D1, D3 and MA fields in the KG-D6 block, output began lagging within two years of the start of production. Reliance and BP are now jointly developing three sets of discoveries in KG-D6 block.


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