Reliance Industries Ltd (RIL) will surrender its Krishna Godavari basin gas discovery block, KG-D3, owing to operational restrictions placed by the defence ministry, the block's minority partner firm said Wednesday
"Hardy Oil and Gas plc, announces that on Dec 23, 2014 the company consented to the relinquishment of the KG-DWN-2003/1 (D3) exploration licence," the British major holding 10 percent stake in the block said in a release.
"RIL, which had made four consecutive gas discoveries with close to 500 billion cubic feet of in-place reserves in block, proposed immediate relinquishment," it added.
RIL recommended the relinquishment of the block to the Director General of Hydrocarbons (DGH)-headed Management Committee, saying restrictions imposed by the defence ministry rule out any further exploration or development activities in the impact zone area and inhibit the contractor from undertaking any further work.
"This untenable position was further compounded by the uncertainty of long-term natural gas pricing in India, following the government policy announced earlier in the year which imposed pricing at a significant discount to our expectation of regional market pricing," Hardy said.
The government in October raised the domestic natural gas price to $5.61 per million British thermal unit, which is around half of what the industry was expecting.
RIL sold 30 percent out of its 90 percent original interest in the block to British Petroleum (BP) in 2011.
Hardy said the release of liabilities associated with the D3 block put it now in a stronger working capital position from which to fund its planned work activity on other assets in India.
