Moily hints of relief to RIL on KG-D6 relinquishment issue

In a relief to Reliance Industries, Oil Minister M Veerappa Moily has indicated that he may not fully accept DGH's recommendation for taking away 86 percent of the company's KG-D6 gas block area.

Updated: Jun 16, 2013, 12:29 PM IST

New Delhi: In a relief to Reliance Industries, Oil Minister M Veerappa Moily has indicated that he may not fully accept DGH's recommendation for taking away 86 percent of the company's KG-D6 gas block area.

The Directorate General of Hydrocarbons (DGH) had recommended to the ministry that RIL be asked to give up 86 percent of its KG-D6 gas block area, including eight gas discoveries worth at least USD 5 billion, saying the firm has overshot the time allotted to it for developing the area.

"That is matter under examination," Moily told PTI in an interview here.

He said a decision on the matter will not be taken on mere technicality of rules and it would be taken keeping the energy security of the country in mind.

"Automatically, technically applying rule is good for you (but) it is not good for the country," he said without elaborating.

Moily wants the country to explore aggressively so that more oil and gas is produced which will help cut the massive USD 160 billion foreign exchange outflow every year for buying oil.

Rejecting RIL's offer to relinquish 4,233 sq km of "low prospectivity area" in the eastern offshore KG-DWN-98/3 or KG-D6 block, the DGH had stated that the company should contractually give up 6,601 sq km out of the total 7,645 sq km total area in the block.

In a 6-page note, Director General of Hydrocarbons R N Choubey on April 15 wrote to Oil Secretary Vivek Rae that of the 19 oil and gas discoveries claimed by RIL, three finds have not been established as commercially viable in absence of test data and the company has not submitted any investment plans for another five.

He noted that the area proposed for cessation has at least 1.15 trillion cubic feet of known recoverable gas reserves valued at USD 4.83 billion at current prices.

Asked about his ministry calling for applications for appointing a new DGH, Moily said he wants the technical arm of the ministry to be manned by a technocrat and not an IAS.

"I want a technical man (at DGH). For last one or two years, we (have) continued with a non-technical man. It is not good (and) you don't get correct objective opinion," he said.

Choubey, a 1981 batch IAS officer of Tamil Nadu cadre, was appointed DGH in June last year when S Jaipal Reddy was the Petroleum Minister. Moily took over in November last year.

Moily said the new DGH will be selected from those who applied at close of application on May 31, by a panel comprising of secretaries headed by Oil Secretary Vivek Rae.

The panel comprises Secretary to Department of Personnel and Training and Science and Technology Secretary, he said.

To prevent companies from hoarding exploration acreage, they are contractually required to relinquish 25 percent area at the end of three years, 50 percent after another two years and are allowed to retain only areas where discovery is made after a total of seven years.

RIL and its partner Niko Resources of Canada were awarded the KG-D6 block in 2000. The three-year Phase-1 ended on June 7, 2003 while the 2-year Phase-II expired on June 7, 2005. The third phase ended on June 7, 2007.

Sources said DGH in 2006 agreed to RIL proposal of declaring the entire 7,645 sq km as discovery area, thereby allowing the company to retain the full area.

The decision was ratified by a committee headed by Additional Secretary in the Ministry and by the Oil Minister thereafter.

But the decision was questioned by government auditor CAG as at the end of the third phase, only 79 percent of the block area was covered by 3D seismic survey and yet the entire area was declared a discovery area.

CAG, in its performance audit in 2011, had asked the Ministry to review determination of entire contract area of KG-DWN-98/3 (KG-D6) as 'discovery area'.

KG-D6 output has dipped from 69.43 million standard cubic meters a day (mmscmd) achieved in March 2010, to under 15 mmscmd this month.