Gas output plunge at D6 block is a default by Reliance Industries: Panel

NEW DELHI: A parliamentary panel has concluded that the sharp fall in gas output at D6 block of Reliance Industries should not be regarded as mere 'failure' but seen as a default, which the oil ministry separately said can be punished only by contract termination.

The standing committee on petroleum and natural gas tabled its report on allocation and pricing of gas in the parliament on Tuesday, where it asked the oil ministry to "explore all possible option and take corrective measures to increase the natural gas production" from RIL-operated gas fields.

The committee has taken "serious note" of the oil ministry's version that the contractor failed to adhere to the approved development plan, both in terms of gas production as well as drilling and putting on stream the required number of wells, even after repeated reminder, the report said.

"In view of the above, the committee is of the opinion that non-adherence by the contractor to approved field development plan should be construed as 'default' and not just failure and remedial action by the ministry must be premised on 'default' by the contractor and not on 'failure'," it added.

The oil ministry told the panel that the "default is punishable only by termination of the contract. There is no other remedy," the report said.
RIL did not respond to ET's email query.

The oil ministry and RIL have locked horns over the reasons for a sharp decline in gas output from KG-D6 block for last three years. Output from D1 and D3 gas fields in the block fell sharply after achieving about 62 million metric standard cubic meters per day about three years ago. The fields are currently producing less than 10 mmscmd gas, which is far below the peak output of 80 mmscmd.

The ministry blamed the contractor for declining production saying it did not drill the required number of wells as envisaged. But, RIL argued that the decline was due to complex re reservoir behaviour. The ministry informed the committee that the matter is under arbitration since May 2012, when it sent a notice to Reliance, disallowing $1.005 billion expenditure until planned output is achieved. The panel said; "The expert has observed that shortfall in production is due to non-drilling of adequate number of wells."