Reliance Industries KG-D6 gas output drops to 9% of target: Pradhan

Reliance Industries' flagging KG basin D6 block has seen natural gas output slip further, leading the government to disallow $2.756 billion in cost, Oil Minister Dharmendra Pradhan said on Monday.

RIL and its partners BP plc of UK and Canada's Niko Resources produced less than 16% of the 31,793.28 million standard cubic meters (mmscm) target from KG-DWN-98/3 or KG-D6 block in 2013-14.

Output fell to 4,461.91 mmscm or 13.75% of the targeted 32,458.72 mmscm in 2014-15 and to 3,939.97 mmscm or 12.24% of the target in the following year, he said in a written reply to a question in the Lok Sabha.

In the current fiscal 2016-17, RIL and its partner have produced 2,641.67 mmscm of gas till February as against target of 29,316.69 mmscm, he said.

Pradhan also said the Gujarat government firm GSPC too has produced much less than target in the three years but no penalty has been levied on it.

Gujarat State Petroleum Corp (GPSC) produced 23.44% of the targeted 470 mmscm of gas from its KG-OWN-2001/3 block in 2014-15 which when down to 11.09% of the targeted 1210 mmscmd in the following year. In the current fiscal, just 6.29% of the targeted 1,850 mmscm gas has been produced.

"The gas production from D1 and D3 fields in this (KG-D6) block (of RIL) is much less than the production rates approved in addendum to Initial Development Plan (AIDP)," he said.

He added that RIL set up facilities to produce gas of 80 million standard cubic meters per day but "failed to adhere to approved field development plan in terms of drilling and putting on stream the required number of wells and consequent achievements of projected gas production profile in AIDP".

This, he said, has led to under-utilisation of facilities and surplus inventories.

"Government of India issued notice for proportionate disallowance of cost of production facilities based on cumulative shortfall in gas production vis-a-vis AIDP targets," Pradhan said.

Consequently, he said, the government has disallowed $2.756 billion from the cumulative development cost incurred by RIL and its partner as on March 31, 2015.

"This disallowance was computed based on the cumulative shortfall in production of gas vis-a-vis production estimates under the approved AIDP till March 31, 2015.

"The additional profit petroleum payable to the government by the contractor (RIL) for the period up to FY 2014-15 is approximately $246.9 million," he said.

RIL and its partners have disputed the cost disallowance and have initiated arbitration.