RIL, govt differ on gas exploration norms

Reliance Industries has accused the petroleum ministry of violating Parliament approved norms for oil and gas exploration in the country by proposing new guidelines that it said reduced operational flexibility.

The petroleum ministry has proposed guidelines for "enhancing effectiveness" of Management Committee (MC), which oversees oil and gas exploration in areas or blocks awarded to companies under the landmark New Exploration Licensing Policy (Nelp).

"With the aim to tackle smaller issues, the flexibilities that were purposefully built in the Nelp policy framework and in the Production Sharing Contracts (signed for blocks awarded under Nelp since 1999) are being modified/curtailed by way of guidelines," the company wrote to the ministry.

"As a result, the overall drawn-up field is slowly being reduced with lesser and lesser operational flexibility to the investors."

Reliance opposed the proposal of establishing a benchmark internal rate of return for declaration of commerciality of a discovery, saying Nelp gave the right for declaration of commerciality to companies as an incentive to cover for their exploration risk. Any deviation would not be in line with the express intent of Nelp, it said.

The PSCs signed under Nelp explicitly makes procurement of goods and services for petroleum operations a responsibility of the companies, but the proposed guideline for MC setting a pre-qualifying criteria went against the PSC provisions, it said.

Stating that such a norm would restrict operations and may hamper sourcing of best technologies and resources, Reliance said the tendering criteria have been clearly specified in the PSCs and should be followed.

Reliance said signed PSCs are legally binding documents and any guideline should be within the PSC framework. "The guidelines should facilitate speedy implementation of the projects and timeliness provided in the PSC should be adhered to by parties."

"The guidelines should also take into account to accommodate situations such as uniqueness of blocks/operations such as logistics, geological challenges, infrastructure, complexity of operations such as in ultra-deepwater operations," it said.

The Nelp policy and model Production Sharing Contract was drawn up considering huge requirement of risk capital in the Indian exploration and production industry.

Keeping in mind the "not-so-encouraging exploration prospects" perception worldwide about Indian E&P segment, the boundary of the overall playground was accordingly drawn up with much liberalisation in fiscal incentives as well as contractual conditions of the PSCs.