No proposal to hike RIL gas price till 2014, says govt

A day after being attacked by India Against Corruption, the government came out strongly against media reports related to its audit and gas pricing of Reliance Industries operated KG D6 block. The government reiterated that there is no proposal to revise prices of D6 gas before the end of the five-year period in April 2014.

The strongly-worded government statement also said an additional expenditure of $1 billion has been agreed by the Managing Committee that oversees contract with the operator subject to the condition that RIL will accept CAG Audit.

IAC activist Arvind Kejrival on Wednesday claimed that Jaipal Reddy was shunted out of petroleum ministry due to his opposition to gas price revision. RIL is seeking a three-fold increase in gas price to $14.2 per unit against the current price of $4.2 fixed for five year beginning April 2009 when production started.

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

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On allegations of 'gold plating' in D6, the statement said "the stand of the petroleum ministry with regard to the production and expenditure has been consistent from 2006 onwards 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 said the capex on D6 was revised from $2.4 billion in 2004 to $8.8 billion in December 2006 after recoverable reserve was projected at 10.3 trillion cubic feet from 3.81 tcf earlier.

"They (RIL) have again submitted a revised Field Development Plan in September, 2012 bringing back the reserves at 3.4 tcf and Capex to $6.2 billion. This is being examined critically by DGH".

It said the decline in D6 gas production from projected 81 million standard cubic metres per day (mscmd) to 20.5 mscmd in 2012 has prompted government of India to stop proportionate cost recovery by the contractor, which is under arbitration. "The petroleum ministry will continue to protect the government's interest in all force".

It said it was the government that approached the Supreme Court in RIL-RNRL case in 2010 to assert its right over gas utilisation.

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On press reports regarding postponement of a technical meeting with CAG regarding audit of certain oil and natural gas blocks, the statement said the meeting was called at official level to discuss the procedural issues of audit by CAG and due to certain administrative inconvenience it was postponed on October 26, 2012, itself (well before the cabinet reshuffle).

The postponement of the meeting will in no way affect either the procedure or the content of the audit by CAG of these Blocks.

IAC had demanded that the contract to RIL must be cancelled. However, the statement said that allegations regarding favourable contractual arrangements in oil and natural gas exploration are baseless. As per the policy, Government of India offers exploration blocks under New Exploration Licensing Policy (NELP) through an International competitive and transparent bidding system.

In the first round of NELP Blocks, a deepwater block KG-DWN-98/3 was also awarded to RIL and Canadian firm Niko Resources on competitive bidding basis. The production sharing contract with RIL is a generic template and not specific to RIL.