 "Oil Min moves Cabinet to deny RIL higher gas price")
The Ministry wants the current rate of $4.2 per million British thermal unit to continue to apply for gas produced from Dhirubhai-1 (D1) and D3 fields even after expiry of the current term on March 31, 2014.
The government had in late June approved pricing of all domestically produced natural gas at an average of international hub rates and actual cost of LNG into India from next fiscal. The new rate, according to this formula, would be around $8.4 per mmBtu.
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The new rates were to apply uniformly to gas from RIL fields as well as those of state-owned ONGC. Now, the Ministry wants the old rates to continue for D1&D3 fields but the new price would apply to all other fields in the KG-D6 block including the currently producing MA oil and gas fields.
"There is some technical dispute about the quantum of gas available in some discoveries in KG-D6 block and that is a technical dispute between RIL and Directorate General of Hydrocarbons (DGH). That matter needs to be resolved before we take a final decision applicability of new formula," Oil Secretary Vivek Rae told reporters here.
DGH believes output from D1&D3 fell to 10.12 million standard cubic metres per day from 53-54 mmscmd achieved in March 2010 because RIL did not drill its committed number of wells. More wells, it believes, would increase output.
RIL on the other hand blames unforeseen geological complexities for the fall in output and believes the reserves in D1&D3 are actually less than one-third of 10.3 Trillion cubic feet predicted two years before the field began output in April 2009.
Rae said the block oversight panel, called the Management Committee headed by DGH, will decide on the technical dispute - whether reserves are actually lower than those estimated earlier or drilling new wells can raise output.
RIL and its partners BP plc of UK and Canada's Niko Resources has submitted a revised field development plan for D1&D3 to the MC detailing the lower reserves and the corresponding cut in expenditure from $8.8 billion proposed previously. If MC, which also has an Oil Ministry representative, accepts the RFDP it would mean that it has accepted RIL-BP's arguments.
A similar RFDP for MA field, which has seen output halve to 3.5 mmscmd, was made by RIL-BP lowering the reserves and the MC accepted it. So, the new gas price will apply to MA field.
Rae said, "If necessary, we will even get in international experts to give their independent opinion and once it is resolved then all roads will be cleared either way."