Production deals shouldn't be tweaked by anyone: RIL

Energy major Reliance Industries today said that Production Sharing Contracts (PSCs), like the one it had signed for KG-D6 fields with the government, should not be tampered with by anyone.

Addressing a conference on natural gas, RIL President (International Operations) Atul Chandra said exploration was a very high-risk business and any modification in the PSCs — under which operators like RIL explore for oil and gas and get paid for their effort — would lead to loss of faith in the system.

His comments assume significance in view of the ongoing tussle between the Ambani brothers, Mukesh and Anil, over supply of gas from RIL’s KG-D6 fields.

While Mukesh Ambani-led RIL says it is just a contractor under the PSC that also gives the government the right to approve gas sale price and fix users, younger brother Anil-run RNRL says the government role was limited only for the purpose of valuation of the gas and RIL had full marketing freedom.

Chandra said the PSC system in India was based on global industry practice where companies take the risk of investing in areas with no discoveries.

If they don’t find any oil and gas, the money they spent is written off. But in case of a discovery, the hydrocarbon produced is shared between the companies and the government.

RIL, he said, was producing about 50 million standard cubic metres per day (mscmd) of gas from two fields in KG-D6 block and the output is expected to touch 80 mscmd shortly.

Chandra said the exploration business is highly risky and requires a lot of investments. Nearly $150 million was required to drill a well and it would go waste if no oil or gas were produced from the well.

“KG-D6 is the first deep water block the RIL had got. Initially we wanted to tie up with some international majors. However, we had to go on our own, as no one had shown interest,” he said, adding the Indian companies in the sector are now capable of handling exploration on their own.

He also said that Andhra Pradesh would become a hub for natural gas in the country.