The government has decided to take away five gas discoveries announced by Mukesh Ambani’s Reliance Industries Ltd (RIL) in the KG-D6 basin, off the coast of Andhra Pradesh. These five blocks are believed to hold gas worth $10 billion (about Rs. 62,000 crore). British Petroleum Plc has a 30% stake in the block.
The Directorate General of Hydrocarbons, the oil regulator, had recommended that eight gas producing blocks be taken away from Reliance as it had failed to submit plans to commercially exploit the fields. It has been alleged that RIL had been hoarding its discovered gas so that it wouldn’t have to sell it at the prevailing price of $4.2 per unit. Gas prices have been revised to $6.7 per unit wef April 1, 2014.
But petroleum minister Veerappa Moily had, on October 9, approved the decision to take away five of these blocks. The company has been allowed to retain three of the blocks under review. Reliance has announced 18 oil and gas discoveries in the KG-D6 basin. There is no dispute over the other 10 discoveries.
“The contractor (RIL) should be asked to relinquish areas pertaining to five discoveries (814 sq km) with immediate effect," sources familiar with the development said.
The RIL spokesperson refused to comment on the development. But in August, RIL executive director PMS Prasad had written to the oil ministry: “…projecting RIL as a defaulter and forcing it to relinquish discovered resources will not only hurt investors but considerably reduce the chances of many of these discoveries ever being produced”.
Ambani and British Petroleum CEO Bob Dudley had met finance P Chidambaram and Moily on October 18 and had also made a detailed presentation to show RIL had not defaulted on the production.
RIL, in its August letter, had also said it has “spent enormous amounts of time and money on bringing these discoveries to fruition” and would “suffer immensely if pushed to a situation of forced relinquishment of rightful discoveries.”
RIL was awarded the KG-D6 block in 2000 and has been producing gas from three fields since September 2008-09.