CAG questions gas price hike; won't dig more wells, RIL tells SC

It seems there is no end to Reliance Industries’ troubles with the Comptroller and Auditor-General (CAG).

According to a report in The Hindu, the national auditor has questioned the Petroleum and Natural Gas Ministry over the recent gas price hikeand sought to know the steps taken to ensure that RIL-BP, the operators of KG-D6 block, delivers gas at pre-hike level of $4.2 mBtu, which was part of the approved production plan.

The CAG has sought to know why the ministry has not exercised its right to fix the price under Article 21.6.3 of the production sharing contract (PSC) for the KG-DWN-98/3 block.

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Not just that.In what could prove another setback for the company, the petroleum & natural gas ministry has proposedto deny it a higher price for gas produced from its D1 and D3 discoveries, if it is established the company artificially suppressed output in these fields.

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Meanwhile, the Times of India reported today that Reliance Industries has assured the Supreme Court that it would drill no more wells in KG basin despite the Centre’s recent decision to hike the price of gas.

“Despite the proposed revision in price, the answering respondent (RIL) has no intention of drilling more wells in this D1 and D3 fields in block KG-D6 giving a complete lie to the suggestion that the drilling of wells was held back to await a price hike,“president and chief operating officer of exploration and production division of RIL B Ganguly has told the court, the ToI said.

RIL has also lashed out at a move to force it to sell gas from main KG-D6 fields at old rate of $4.2. The company said the ‘illegal’action runs contrary to the signed contract and will stifle private investment in oil and gas hunt.

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While the cabinet has approved doubling of gas price from 1 April next year, the petroleum ministry is proposing that old rates of $4.2 per million British thermal unit apply to gas from D1/D3 and MA fields in eastern offshore KG-D6 block until it is proved that RIL had provide evidence as to it produced less than targeted gas only because of geological factors.

(Disclosure: The Reliance Group has funded the promoter of Network18, which publishes Firstpost).