 "Govt imposes $792 million additional penalty on RIL")
New Delhi: The government has slapped anadditional penalty of $ 792 million on Reliance Industriesfor producing less than targeted natural gas from its eastern
offshore KG-D6 block.A notice disallowing $ 792 million out of the costalready incurred on the Bay of Bengal fields was sent to RILon November 14, an oil ministry official said here.
With this, a total of $1.797 billion penalty in formof cost being disallowed, has been levied on RIL for producingless than targeted output during the past three years. The company has till date spent $10.76 billion on theblock, which it can contractually recover from sale of oil andgas. It is obliged to share the profits with the governmentonly after recouping those expenses.
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 The bank guarantee will be encashed if it is proved that RIL hoarded gas or deliberately suppressed production at the Dhirubhai-1 and 3 (D1&D3) main gas fields in its eastern offshore KG-D6 block, said a top Oil Ministry official.
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The official said the cost has been disallowed as RIL andits partners BP plc of UK and Canada’s Niko Resources did notdrill the committed number of wells, which led to outputdropping by over 80 per cent from the main Dhirubhai-1 and 3(D1&D3) gas fields in the KG-D6 block.D1&D3 fields have in the first fours years of production(2009-10 to 2012-13) produced a total of 1.853 Trillion cubicfeet of gas, 1.196 Tcf short of 3.049 Tcf that RIL hadcommitted to produce in the 2006 development plan.
But for the first year, the output has lagged the targetsin all subsequent years, which has led to a huge chunk offacilities built lying untilised, the official said.RIL had built facilities to handle 80 million standardcubic metres per day of gas from D1&D3 but the present outputis just 8.78 mmscmd.As per the production sharing contract, RIL and itspartners BP Plc and Niko Resources are allowed to deduct allof the capital and operating expenses from sale of gas beforesharing profits with the government.
Impact Shorts
More ShortsCreation of excess or unutilised infrastructure impactsgovernment’s profit share and this is being sought to becorrected by disallowing part of the cost.
According to the approved field development plan, theoutput should have reached 80 mmscmd last fiscal.The government had previously issued a notice to RIL
disallowing $1.005 billion in cost for shortfall inproduction during 2010-11 and 2011-12. ($457 million for2010-11 and the rest $548 million for 2011-12).
The Mukesh Ambani-run company, which blamed unseengeological complexities for the fall in output, has initiatedarbitration against the levy. The new levy would be opposed.The DGH blames RIL for not drilling its committed quotaof wells for the fall in production that has resulted in alarge chunk of production facilities lying unused orunder-utilised.
PTI
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