The government will initiate action to limit the amount of expenditure Reliance Industries is allowed to recoup from its flagging KG-D6 gas fields in three to four weeks, Oil Secretary G C Chaturvedi said on Tuesday.
Reliance has built facilities to handle 80 million cubic metres per day of gas production, but the fields are producing less than 42 mmcmd.
Production Sharing Contracts (PSC) allow the operator to recover 100 per cent of their exploration and production costs and does not link cost recovery to output.
However, the ministry wants to "disallow expenditure incurred in constructing production/processing facilities at the Dhirubhai-1 and 3 gas (D1 & D3) fields in the KG-D6 block that are currently under-utilised/have excess capacity because of falling output".
The Law Ministry, which relied on Solicitor-General Rohinton F Nariman's comment for its opinion, has backed the move, but has not quantified how much of the USD 5.8 billion that Reliance has already invested should be disallowed.
"Law Ministry does not quantify the amount... If at all, we will have to do that," he said.
Asked if the PSC provides for restricting cost-recovery,
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