Reliance Industries (RIL) has slammed the Directorate General of Hydrocarbons' (DGH) move to snatch 86 per cent of its KG-D6 block area, including eight gas discoveries worth $10 billion, as "arbitrary" and said the oil regulator is responsible for the delay in developing the finds.
RIL executive director P.M.S. Prasad on August 24 wrote a strongly-worded letter to oil secretary Vivek Rae, questioning the intent of DGH in asking the company to give up 6,601 sq km out of the total 7,645 sq km area in the block on the grounds that the time line to develop the fields has expired.
Of the eight discoveries in the area, DGH refused to consider investment plans for five, with 0.8 trillion cubic feet of reserves, saying they are not viable at the current price of $4.2 per million British thermal units.
The regulator refused to recognise the other three as discoveries in the absence of prescribed tests to confirm them and then disallowed pleas by RIL and partner BP Plc for time to do the tests.
"In spite of the PSC providing for sale of gas at market prices, and the approved price of $4.2 being only valid until March 31, 2014, DGH insisted on evaluating the proposed development plan (of five discoveries) at a gas price of $4.2 and declared them to be unviable," Prasad said, adding this was done even after the knowledge that the field would start production much later than April 2014.
Prasad said that Reliance and BP had agreed to carry out the DGH-prescribed drill stem test to confirm the three discoveries but the regulator never approved them and was now insisting on relinquishment of the areas.
In the 11-page letter, a copy of which was marked to oil minister M. Veerappa Moily, Prasad asked Rae to "advise the concerned to rectify the errors and remove the hurdles which are needlessly delaying further progression in these discoveries".