The Ministry wants to deduct USD 115 million from sale proceeds of the crude oil to make up for the additional profit petroleum it believes is due after disallowance of USD 1.797 billion in cost for KG-D6 gas output falling short of target. It has asked RIL to sell oil to Chennai Petroleum Corp Ltd (CPCL) on an interim basis.
RIL transfers shipload of crude oil from the offshore MA oilfield in the predominately KG-D6 block off the Andhra coast, to user refinery once a month and the occasion for such a transfer hasn't arisen since the Ministry order.
RIL, which sold MA crude to CPCL during first five years of production on negotiated terms, earlier this year floated a tender for sale of 2.5 million barrels of oil in 2014-15.
Jamnagar refinery of RIL won the tender as CPCL offered a pricing formula that was about USD 4-5 per barrel less than the formulation quoted by the private sector refiner.
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Incidentally, RIL had sold condensate from the block for almost two years as well as test oil Cambay basin block to Jamnagar with full knowledge and approval of the Ministry. No issue of Jamnagar refinery being an affiliate was raised then.
The Ministry had disallowed USD 1.797 billion in cost for gas output from main fields in KG-D6 block falling short of target between 2010-11 and 2012-13. It calculated that the government should have got an additional profit share of USD 115.263 million.
After including cost disallowance of USD 579 million for 2013-14, the total additional profit petroleum claimed from RIL comes to USD 195 million, sources said.
However, the cost disallowance issue is under arbitration and it is unclear how the Ministry wanted additional profit petroleum even before the issue is decided.
"KG-D6 crude oil is being stock transfered/sold to RIL Jamnagar refinery at price established through a transparent arm's length sales process.