RIL protests against move to snatch away 5 gas discoveries

Reliance Industries has lodged a strong protest against the government move to snatch away

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an area containing five gas discoveries, saying the decision was a breach of contract.

The Oil Ministry had on October 28 ordered RIL to surrender 6,198.88 square kilometres of a 7,645 sq km area in its eastern offshore KG-D6 block, 15% more than the 5,367 sq km the company had voluntarily offered to relinquish.

The excess area being taken away holds five discoveries -- D-4, D-7, D-8, D-16 and D-23 -- with 0.805 trillion cubic feet of gas reserves, or about one-fourth of the restated reserves in the producing Dhirubhai 1 and 3 (D1&D3) fields in the KG-D6 block, and is worth $10 billion.

RIL President & COO B Ganguly on November 11 wrote to the Oil Ministry, expressing surprise at the order when the field development plan (FDP) and the application for issuance of the petroleum mining lease for the five discoveries was under consideration of the government.

The five discoveries, he wrote, are non-associated natural gas find, which under the Production Sharing Contract, the company was entitled to retain as a discovery area.

Stating that all timelines prescribed in the PSC were followed, he said RIL submitted the proposal to declare the finds commercial within the stipulated three years and a FDP for the five finds along with four others on July 14, 2008, within the prescribed one year.

RIL said the Directorate General of Hydrocarbons (DGH) communicated that the discoveries are unviable at the current price of $4.2 only on March 31, 2009, as against the PSC stipulated timeline of deciding the issue within 180 days from the submission and 90 days from receipt of additional information.

"The DGH evaluation using a gas price of $4.2 per million British thermal units ignored the fact that the gas price of $4.2 was valid only until March 31, 2014, and that the competitive arm's length or market price for gas might increase," Ganguly said.

Following the DGH advice, RIL submitted an optimised field development plan on December 19, 2009, for the big four out of the nine discoveries and left the rest for being tied up at a later date.

RIL said the original FDP of July 2008 for the five finds was still valid and had not been withdrawn and the DGH assertion that no development plan was submitted for D-4, D-7, D-8, D-16 and D-23 was not true.

The "order for relinquishment of area relating to these discoveries is inconsistent with the provisions contained in the PSC and is in breach of the contractor's right under the PSC," Ganguly added.

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