Reliance Industries could be penalised for gas shortfall: Oil ministry source

NEW DELHI: The government is considering a penalty for Reliance Industries for falling short of targeted gas production at its D6 block, an oil ministry source said on Wednesday.

The gas from the block is sold to buyers prioritised by the government.

Reliance is pumping 28 per cent less gas than it should from the key block, upstream regulator said earlier this month and added it would meet with the company.

Reliance has just partnered with multinational operator BP on field development.

Earlier last week, the government had directed Reliance Industries to stop supplying gas from KG-D6 block to refineries, steel firms and petrochemical plants and divert the volume to meet the demand of priority consumers, suffering a pro-rata fuel supply cut after the block's output dropped by about 28%.

The government's order is likely to impact KG-D6 gas consumers such as Indian Oil Corp's refinery in Gujarat, Gail's Pata petrochemical plant, RIL's petrochemical projects in Gujarat and Maharastra, and Essar Steel.

The RIL-operated block is currently producing about 50 mmscmd gas, well short of 69.8 mmscmd as per the government approved plan.

The Directorate General of Hydrocarbon ( DGH), a technical arm of the oil ministry, blamed RIL for the sharp decline in gas output. The government's technical experts were not satisfied with RIL's reasons for a shortfall in production.

The decline in gas output has resulted into a pro-rata cut up to 15% in supply to gas consumers such as power and fertilizer companies.

The government was also concerned about the future gas supply as the RIL indicated further decline in the gas output by 5-6 mmscmd in 2012-13 while it should have achieved a peak output of 80 mmscmd by then as per the approved production plan.

At 2:25 pm, shares of Reliance Industries were trading 1.87 per cent down at Rs 982 on the Bombay Stock Exchange.