If the management committee disallows commerciality of new discoveries in the KG-D6 block of Reliance Industries Ltd (RIL), the company may end up losing these whenever it surrenders acreage in the block. Under pressure after an adverse report from the Comptroller and Auditor General, RIL is planning to surrender part of the block in line with requirements of the production sharing contract.
As RIL has crossed the exploration stage, it may be required to surrender areas other than for which it has a mining lease. Which area would eventually be relinquished depends on the data regarding discoveries and the proposal of RIL, the operator of the block. A person privy to the procedures said relinquishment of 25 per cent area at the end of Phase I and Phase II was a requirement at that particular time when RIL was doing exploration. “Now, the company could be asked to surrender the entire area barring where field development plan for commercial discoveries have been approved,” he told Business Standard.
A senior government official said the ministry of petroleum and natural gas has not received any communication from RIL for surrendering the block so far. An RIL spokesperson declined to comment on the matter. The CAG had, in its report on functioning of hydrocarbon production sharing contracts tabled in Parliament in September, said RIL was allowed to enter the second and third exploration phases without relinquishing 25 per cent each of the total contract area at the end of Phase-I and Phase-II in June 2004 and 2005 respectively as against Articles 4.1 and 4.2 of PSC by treating the entire contract area as discovery area.
“Subsequently, in February 2009, the government also conveyed approval to treat the entire contract area of 7,645 sq km as discovery area, thus enabling the operator to completely avoid relinquishment of area.”
Recently, a meeting of the management committee did not approve commerciality of its four more discoveries in the block. The approval of commerciality would have paved the way for investment of around $1.5 billion in developing the four discoveries.