Oil ministry seeks more time for Reliance Industries' gas finds

NEW DELHI: The oil ministry plans to seek the Cabinet’s view on granting an extension to timelines for eight discoveries of Reliance Industries Ltd, which have not progressed because the company and the oil ministry have differed on the kind of test that should be conducted to confirm the finds. The dispute over the test and endless correspondence between the company and the government has delayed work on the project beyond the prescribed deadline. Government sources said the approval of the cabinet is necessary to allow work on the project after the expiry of deadlines prescribed in the contract,. This is because the original contract, which has the deadline, was approved by the Cabinet Committee on Economic Affairs.

Responding to queries from ET, RIL urged appreciation of the fact "that our corporation has not been afforded its legal and contractual entitlements even after actual cabinet decision(s) had taken place many months back."

News agency PTI reported on Tuesday afternoon that the oil ministry had moved a cabinet note seeking extension for RIL.

The oil ministry has suggested to the cabinet that the company should be given one more year for appraisal of the discovery and another year to prepare the development plan. Otherwise, the discovery area would have to be relinquished, but in that were to happen, it would be offered for bidding again, delaying the development of a proven field and also risking initiation of arbitration proceedings by the contractor, official sources said.

Sources said the contract requires relinquishment of the discovery and the related area if the contractor does not start production within 10 years from the first hydrocarbon find. At the heart of the dispute is the mandatory test required to evaluate the discovery.

The company says it has conducted a more reliable and modern test, but the directorate general of hydrocarbon (DGH) has argued that the production sharing contract (PSC) specifies a different test, which the government says is more comprehensive and minimizes the possibility of gas production being less than what is envisaged in the field development plan. However, sources said certain discoveries in the past had been approved without the Drill Stem Test (DST), which the DGH is now insisting on. The discoveries in question are in three blocks including the famous KG-D6 block valued at about $7 billion.