RIL hints at legal action if forced to sell gas at old rate

Says India lacks stable policy regime

Reliance Industries has reacted to government’s move asking the firm to meet its old commitment from its main field KG-D6 on selling gas at old rate of $4.2 and hinted that the company could take legal action against the move.

The Mukesh Ambani-run firm also said India does not have a stable policy regime which is essential to bring in investors.

To a question on what RIL will do in case the government forces old prices, RIL Executive Director P M S Prasad said, "That is the worst that can happen. I don’t know if that is true. If that is true, then that is a problem.”

"We clearly will say it is violation of the production sharing contract. So whatever is the dispute resolution mechanism, we will have to resort to," he added.

 Prasad said the New Exploration Licensing Policy (NELP), under which RIL had won the eastern offshore KG-D6 block in 2000, has been continuously eroded by taking away several of its rights.

 “As you see, there is a continuous erosion of this NELP by taking away several of the rights that were given under the NELP. I don’t want to go into the details but that is what is happening today. You bring in all kinds of extraneous factors into the business, not honour the PSC, that is the worst thing that can happen. So where is the stability in policy," Prasad said.

"It is there for everyone to see. We don’t have a stable policy regime which is essential if you expect any investor to come in and invest either in technology or put in big risk investment that are required in (oil and gas) exploration, appraisal and development," RIL Executive Director P M S Prasad said. 

Prasad said several foreign companies like BG, Shell, BHP, Santos of Australia, Statoil and Petrobras were present in the country but "they all have left".

He identified two reasons for their exit - low prospects of Indian basins and fiscal instability.

"You have to compensate poor prospectivity by giving attractive fiscal regime which we are anyway not giving and then you take away whatever little was given," he said.
The prices of natural gas will be doubled to $8.4 per million British thermal unit in April 2014 when a revision in KG-D6 price is due, but the Oil Ministry is moving Cabinet with a suggestion made by Finance Ministry to ask RIL to sell gas it has failed to deliver in past two years at the old price of $4.2.