)
Reliance Industries Ltd (RIL)'s plans to develop three discoveries in the D6 block of the Krishna-Godavari basin (KG-D6), where it is the operator, is being legally challenged. The ground is the company will make an undeserved and excessive profit.
Lawyer and Aam Aadmi Party leader Prashant Bhushan filed a plea on Monday in the Supreme Court for surrender of the fields. The plea also sought a direction to keep in abeyance any move to change the production sharing contract (PSC) between the government, RIL and its partners.
The ministry of petroleum and natural gas is working on a proposal to allow RIL to apply for a revised declaration of commerciality for its three discoveries in KG-D6. Approval of the Election Commission was intended to be sought, to proceed with a Cabinet proposal to grant RIL the relaxations.
If the permission is not granted, RIL would have to surrender the D29, D30 and D31 discoveries. Owing to the technical disagreement between the company and the directorate general of hydrocarbons, timelines for these discoveries under the existing PSC had expired. Though RIL had filed the declaration of commerciality in February 2010, DGH had rejected these in the absence of drill stem test (DST) data. The test is to assess the reservoir behaviour and the flow of oil or gas to the surface. DGH had maintained DST was both a technical and a contractual requirement.
The ministry had planned to disallow cost recovery of half the DST expenses. Oil and gas explorers, under the New Exploration and Licensing Policy, are allowed to recover their expenses from the production before they offer a share to the government.
"This petition is filed to stop the government from changing the PSC, which they are planning to and which will give windfall of $14 billion to the contractor," Bhushan told Business Standard. Terming the amendment to the PSC "arbitrary, unreasonable and unconstitutional", the application said it was done to allow RIL to retain "lucrative oil and gas fields, which it is contractually bound to surrender."
With similar expiry of timelines in two other RIL blocks due to disagreement between DGH and RIL on the issue of DST, the ministry plans to recommend similar relaxations. These blocks are NEC-OSN-97/2 and KG-DWN-2003/1. The three discoveries in KG-D6 have estimated reserves of 345 billion cubic feet (bcf) of gas, valued at $1.45 bn on a price of $4.2 a million British thermal units. In NEC-OSN-97/2, the reserves in four discoveries are 1,032 bcf, valued at $4.3 bn; in KG-DWN-2003/1, it is 274 bcf, valued at $1.15 bn.
According to the proposal being finalised, RIL would file a revised declaration of commerciality within one year from the approval of the Cabinet Committee on Economic Affairs, after which it would give up its right to develop these discoveries. Besides, the one-year period, RIL would get another year to file a field development plan for these discoveries. Under the PSC, if a contractor does not start development within 10 years of the first discovery, it has to relinquish that area, which would then be counted as being outside the contract area. The first discovery in the KG-D6 block was made in October 2002. Since the 10-year period expired in 2012, RIL would require the two-year relaxation.
Bhushan's application says the CCEA note was moved "while the hearing of this matter is going on" in the Supreme Court. It accused the government of violating certain norms of the PSC. "The very fact that the government is trying to amend the PSC to enable Reliance to retain D29-31 is proof enough that the current retention of these lucrative fields by Reliance is in violation of the express provisions of the PSC," it alleges.
"The first discovery in this Block was made in October 2002 and the 10-year period expired in October 2012. Therefore the timelines prescribed in the PSC have expired and the present proposal to allow development of these discoveries requires relaxation of Article 21.5.12," said the application, quoting the Cabinet note.
