DGH cites difficulty in implementing FinMin suggestion on Reliance Industries

Reliance IndustriesDGH highlighted difficulties in adhering to production deadlines because of various operational reasons. (AP)

Oil regulator DGH has cited practical difficulties in implementing finance ministry's suggestion that Reliance Industries should not be allowed to raise natural gas prices until it makes up for producing less than the projected output since 2010.

Within days of the Cabinet deciding to double natural gas prices to USD 4.2 per million British thermal unit from April 2014, the Department of Expenditure in Finance Ministry on July 4 sent an office memorandum to Oil Ministry asking it to examine if RIL can be asked to deliver the shortfall it owes at the old price of USD 4.2.

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Asked by Oil Ministry to comment on the issue, the Directorate General of Hydrocarbons (DGH) on August 1 replied saying estimates of production outlined when investment plans are approved much before the field is put to production vastly vary with the subsequent targets approved annually by field oversight committee headed by DGH annually.

"In most cases, the projected production in the FDP (field development plan) and in the annual work programme would not be identical. This is because of the dynamic nature of exploration and production activities which need to be adapted to suit the ground realities and operational requirements," it wrote.

While the current production of less than 14 million standard cubic meters per day from RIL's KG-D6 field is way short of 86 mmsmcd target outlined in the 2006 field development plan, it would not be in wide variance with annual output target approved by Management Committee (MC) for 2013-14.

KG-D6, which started gas production in April 2009, touched a peak of 69.43 mmsmcd in March 2010 before unanticipated water and sand ingress shut wells after wells leading to output lagging the estimates outlined in 2006.

DGH said a decision would have to be taken as to which of the projected production figures - ones outlined in field development plan or annual budgets - would constitite targeted production.

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