Decisions on RIL block based on DGH input: OilMin to PAC

With CAG criticising its decisions on Reliance Industries' (RIL's) KG-D6 block, the Oil Ministry has told a high-powered Parliamentary Committee that it was guided by DGH advice when it waived a key clause to allow the firm to retain the entire 7,645 sq km block beyond contractual deadlines.

RIL was to relinquish 25% of the gas-bearing KG-D6 block in 2004 and a similar area in 2006 but the Directorate General of Hydrocarbons (DGH), which was at that time headed by VK Sibal, concluded that hydrocarbon prospectivity "extends over entire block and hence no block area needed to be relinquished."

A committee headed by the then Additional Secretary in the Oil Ministry, S Sundareshan, too upheld the DGH advice, the ministry said in a 140-page response to Public Accounts Committee (PAC) headed by senior BJP leader Murli Manohar Joshi, that is scrutinising CAG report.

"The Ministry relied on the technical input of DGH, the competent technical body appointed by Government for exploration and production operations," the ministry said in response to exhaustive questionnaire put by PAC.

RIL is however "permitted to produce (oil or/and gas) from only a limited 'Development Area' decided at the time of approval of field development plan (FDP)" and excess area will be relinquished, it said.

While the CAG had criticised the decision to allow RIL to retain the entire block as violation of the contract, the ministry said RIL had "carried out exploratory programme much more than what was committed" in the Phase-1 ending in 2004.

RIL drilled 10 wells instead of its obligation to do only one and did 250% more 3D seismic survey. While all the 10 wells were gas bearing, RIL spend $131.77 million up to March 31, 2003 against committed expenditure of $37 million.

The Ministry said the Production Sharing Contract (PSC) provides a contractor with the option of retain such area where he thinks petroleum exits and is likely to be produced in commercial quantities.

RIL which at the end of Phase-1 in 2004 had made 11 discoveries in KG-D6 block, felt hydrocarbon channels were spread over the entire block and thus the entire area should be considered as 'discovery area.'

DGH which had in early 2004 asked RIL to relinquish 25% of the area, asked RIL to do 3D seismic survey on the entire block to prove its point.

Subsequently, the DGH-headed KG-D6 block oversight committee, where the ministry was not represented till late 2006, "on July 11, 2006 agreed with the opinion of the contractor (RIL) that the prospective geological plays had continuity in the entire block, and hence no block area needed to be relinquished."