Reliance Industries Ltd (RIL) - the operator of the prestigious Panna Mukta and Tapti (PMT) oil and gas fields in India - has warned the government that the lack of timely clearances to carry out drilling operations in the gas wells will result in a huge loss of gas production, running into 80 billion cubic feet (BCF) over the six-year period beginning 2013.
RIL, which is the owner of India's largest gas field on eastern coast, the KG D6 gas fields, is also a joint-venture partner in the PMT gas fields along with British Gas (BG) and state-owned ONGC on the western offshore.
"The effect of not drilling these three wells alone is that the estimated gas production from the Mid Tapti fields for the period 2013 to 2019 is likely to be lower by - 80 BCF," RIL said in its September 30 letter to the petroleum ministry and oil regulator, the Director General of Hydrocarbons (DGH).
"The resultant loss of domestic production would have negative consequences for the government, the contractor and consumers", RIL said.
RIL had sought the petroleum ministry and the DGH's approval for the work programme and budget for further development of these fields during 2011-12. This included budget for development capital expenditure of $75 million for three Mid Tapti wells.
In response, the DGH and the petroleum ministry took the position that they would only approve the drilling of development wells on the condition that the contractors (RIL-BG and ONGC) do not cost recover any of capital expenditure incurred in relation to such drilling.
"It is contrary to the terms of the Tapti PSC to subject the approval of works to carry out the overall development of the fields to the issue of cost recovery. The two issues are distinct and separate," RIL said in its letter.
"We consider that the drilling of these wells should and can be approved with your (DGH and petroleum ministry's) rights reserved under the ongoing arbitration between us and the issue of cost recovery is already in dispute between us and until the tribunal decides that issue, the parties should continue to implement the terms of the Tapti PSC as ordered by the tribunal in its directions of July 29 and as also required by Article 33.12 of the Tapti PSC," RIL said.