'Govt won't compromise on legal commitments in RIL block'
New Delhi: With Reliance Industries 'failing' to meet contractual timelines, the Oil Ministry on Wednesday indicated that it will not compromise on legal commitments in the quest for early monetisation of the gas discoveries.
RIL had not met various timelines in case of eight gas discoveries with an estimated 1.15 trillion cubic feet of gas reserves in the eastern offshore KG-D6 block. The same are now part of the area that oil regulator DGH wants the company to contractually relinquish so that it can be auctioned.
"This is a complicated issue... As government, we want to monetise all the gas available in the system and bring it out. Instead of importing (gas) at USD 14, we should bring it out as quickly as possible.
"But you have to do it within legal framework. It is not a system where you can do anything you feel like. There is a production sharing contract (PSC) which decides and determines and defines how you do it," Oil Secretary Vivek Rae told reporters after a nearly three-and-half-hour long meeting on the issue with RIL and its partners BP plc of UK and Canada's Niko Resources.
Rae said the Ministry faced two challenges - monetise discoveries and adhere to the PSC. "That is what we are trying to reconcile."
The government will soon decide if RIL should relinquish certain areas as per contract or it be given permission to go ahead with development of the find, he said.
RIL had not done the prescribed tests to confirm three gas finds while it failed to meet the PSC timelines for submission of investment plans for five years.
These eight discoveries are part of the 6,601 square kilometres out of the total 7,645 sq km area in the KG-D6 block that DGH wants the company to give up on the grounds that the time line to develop the fields had expired.
RIL says DGH was acting in an arbitrary manner as globally drill-stem test (DST) is not done to confirm a discovery and the regulator had found five finds commercially unviable at the current price of USD 4.2 per million British thermal unit.
Rae said it cannot give a timeline for deciding on the issue but said "we want to do it as quickly as possible."
The PSC provides for operators relinquishing areas where they do not find commercially producible hydrocarbons so that these are then put up for further exploration by others.
Rae said RIL was allowed to retain the whole of the block beyond contractual deadlines so that they can do exploration. "Having done exploration, they made discoveries. Having made discoveries, they have to submit declaration of commerciality (DOC) by a certain date.
"Now DoC submitted for 3 discoveries was incomplete because certain tests were not done to establish flow of gas. That issue has remained unresolved for last three years. Meanwhile the time for submission of DoC expires in 2010, so what do you do in year 2013 when three years have gone," he said.