Government gets tough with RIL on K-G gas

Tells it to implement official utilisation policy without more delay, end lag in drilling targets.

The petroleum ministry has hardened its stance on the fall in development plan targets from the D6 gas field of Reliance Industries Ltd (RIL) in the Krishna-Godavari (KG) basin.

It has directed the company to meet its drilling commitments for KG-D6 and reiterated it will have to meet government orders on diverting gas from non-priority to priority sectors. (All gas allocation in the country is decided by the government). RIL has been told that the contractual issues cited by the company, showing inability to divert gas to priority sectors, relate to the gas sale and purchase agreements (GSPAs) signed between RIL and the consumers and needed to be addressed by RIL.

The ministry is unhappy with the tardy drilling progress of RIL at KG-D6, the country’s biggest gas discovery. After a review meeting headed by petroleum secretary S Sundareshan, the Director-General of Hydrocarbons, S K Srivastava, said: “The reasons given by RIL for not meeting field development plan targets are not satisfactory. RIL has been asked to meet the targets. We will call them in early May for further review.”

Against the target of 22 wells by now, RIL has drilled 18, leading to production of 50 million standard cubic metres per day (mscmd) against the projected 69.8 mscmd.

After today’s meeting, the ministry would be writing another letter to RIL and its partner, Niko Ltd, reiterating they have to comply with the directive on diverting supply from non-priority (steel, petrochemicals and refineries) to priority sectors such as fertiliser and power.

‘JUST OBEY’
After a similar letter from the ministry in March-end, RIL responded that contractual obligations did not allow it to divert supplies from one sector to another. And, that a cut in allocation could only be done on a pro-rata basis. It had asked the ministry to suggest how it could do so without attracting penalty under the contracts it had signed.

“Another letter is being sent to them, reiterating that they have to follow the directions and facilitate implementation of the government’s gas utilisation policy. The contractual issues of GSPAs need to be addressed by them,” said a ministry official.

RIL has so far signed up customers for 60.76 mscmd of gas, while production is around 50 mscmd. The government had accorded highest priority to fertiliser plants, followed by LPG extraction units, power plants and city gas distribution projects in allocating KG-D6 gas.

Sixteen fertiliser plants have been allocated 15.35 mscmd of KG-D6 gas on a firm or permanent basis, while 27 power plants in the public and private sectors have been allocated 29 mscmd. A sizeable 7.79 mscmd has been signed up with steel producers, while LPG plants have got 2.59 mscmd. Refineries, including those of RIL, have been allocated 3.46 mscmd, city gas projects 0.65 mscmd and petrochemical plants the balance 1.92 mscmd. With the fall in production, supplies to all these customers have been cut on a pro-rata basis. But the new directive requires RIL to first meet the demand from priority sectors.