Gas find: OilMin split on giving RIL more time

Gas find: OilMin split on giving RIL more time


The Petroleum Ministry is split down the middle on allowing Reliance Industries extra time to validate five natural gas discoveries worth $10 billion.

The exploration division headed by Aramane Giridhar supports the Directorate General of Hydrocarbons (DGH), which first sat on RIL’s discovery notification for almost nine months and then declared that the company had run out of time.

However, the finance wing feels the upstream regulator was equally to blame for the delay in developing the finds.

The heart of the problem is what tests should be done to confirm three gas discoveries in the Krishna Godavari basin KG-D6 block and two finds in the NEC-25 block off the West Bengal coast.

While the contracts for both blocks are silent on the issue, the DGH insists a Drill-Stem Test (DST) is mandatory and in its absence, has not recognised the five finds which hold a cumulative 1.1 trillion cubic feet of reserves, sources with direct knowledge of the development said.

To break the stalemate, the ministry decided to give RIL one year of extra time to conduct DSTs. While Oil Minister M Veerappa Moily feels the ministry is empowered to take such decisions, the exploration division wants this to be vetted by the Cabinet Committee on Economic Affairs.

The exploration division note on the issue also lays the blame for the stalemate on RIL, saying it deliberately did not conduct DSTs and timelines for development of the finds have lapsed, leaving the government with no option but to call for forfeiture of these discoveries.

Monetisation efforts

However, sources said it goes on to state that RIL may be granted extra time in the interest of early monetisation of gas reserves.

However, the finance wing felt the DGH was to be equally blamed for the delay in sanctioning the requisite permissions for submission of the declaration of commerciality and so the allotment of an extra year for the same was justified.

Moily, sources said, has now intervened, recording on the file that the matter was being presented in a manner that indicated a special favour was being granted to RIL by deviating from the PSC provisions, which is not the case.

The minister further wrote that whether DST is mandatory or not under PSC provisions is disputable and there has been considerable delay on the part of the DGH and the ministry.

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