No proposal to raise RIL gas price till 2014, says OilMin

Last Updated: Fri, Nov 02, 2012 04:43 hrs

A day after being criticised by India Against Corruption (IAC), the government came out strongly against media reports related to its audit and gas pricing of the KG-D6 block, operated by Reliance Industries Limited (RIL). The government reiterated there was no proposal to revise the price of D6 gas before April 2014.

The strongly worded government statement also said the managing committee that oversaw the contract with the operator had agreed to an additional expenditure of $1 billion, subject to RIL agreeing to an audit by the Comptroller and Auditor General (CAG).

Yesterday, IAC activist Arvind Kejriwal had alleged Jaipal Reddy was shunted out of the petroleum ministry due to his opposition to a revision in the gas price. RIL has sought a threefold increase in gas price to $14.2 per unit, against the current $4.20 a unit, fixed for the five-year period started April 2009, when production began.

"There were speculative reports in newspapers regarding the revision of gas price before 2014 for block KG-DWN-98/3. It is clarified the government of India has taken a consistent stand from 2010 that the revision cannot take place before 2014," said the statement from the petroleum ministry, now headed by M Veerappa Moily.

On allegations of 'gold plating' in D6, the statement said, "The stand of the petroleum ministry with regard to production and expenditure has been consistent from 2006 and there has been no change in the ministry's resolve to protect the government's revenue by proper and regular monitoring of the expenditure and production." It added capital expenditure on the D6 block was revised from $2.4 billion in 2004 to $8.8 billion in December 2006, after recoverable reserves were projected at 10.3 trillion cubic feet, against 3.81 trillion cubic feet earlier. "They (RIL) had again submitted a revised field development plan in September, bringing back the reserves to 3.4 trillion cubic feet and the capital expenditure to $6.2 billion. This is being examined critically by DGH (Directorate General of Hydrocarbons)," it said.

The decline in D6 gas production - from the projected 81 million standard cubic metres per day (mscmd) to 20.5 mscmd this year - had prompted the government to stop proportionate cost recovery by the contractor, which was under arbitration, it said, adding, "The petroleum ministry will continue to protect the government's interest in all force." It said in 2010, it was the government that had approached the Supreme Court in the RIL-RNRL (Reliance Natural Resources Limited) case to assert its right over gas utilisation.

On press reports regarding the postponement of a meeting with the CAG related to the audit of certain oil and natural gas blocks, the statement said the meeting was called at an official level to discuss the procedural issues of the CAG audit. It added due to certain administrative issues, the meeting was postponed on October 26 (well before the Cabinet reshuffle). The postponement of the meeting would, in no way, affect either the procedure or the content of the CAG audit of these blocks.

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