Government wants fresh estimate of RIL's KG-D 6 reserves

NEW DELHI: The oil ministry has asked Reliance Industries ( RIL) to prepare a fresh estimate of gas reserves in satellite fields of the KG-D 6 block and submit a cost assessment for developing the new discoveries, further delaying the $1.5-billion plan to raise gas output by 10 million cubic metres a day.

The proposal, which is awaiting government approval for two years, was discussed on Friday by the block's managing committee comprising oil ministry officials and executives of global oil major BP and Reliance Industries, government and industry officials said.

The relationship between Reliance and the oil ministry has deteriorated after the company slapped an arbitration notice on the government after Petroleum Secretary GC Chaturvedi publicly stated that the ministry may revise the production-sharing contract to penalize Reliance for falling output from the block.

The director general of hydrocarbons SK Srivastava and the oil ministry's joint-secretary for exploration D Narsimha Raju did not attend the three-hour meeting of the management committee. They were represented by their juniors, officials said, adding that the minutes of previous meetings had not been signed.

Sources close to the development said the government sought a fresh estimate because Reliance's proposal was based on prices prevailing in 2008 and officials wanted to prevent a cost review after approval. The development cost in the existing gas field in the block was reviewed, triggering strong comments from the Comptroller and Auditor General.

"After the current controversy over cost escalation and CAG's comments, we want to make sure that estimates of cost and gas reserves are accurate," an official at the directorate general of hydrocarbons (DGH) said. The management committee has asked Reliance to conduct fresh seabed surveys, which the company estimates would cost $30 million, an executive said.

This was expected be on the agenda of the next meeting of the committee, he said. Gas output from the D6 block has fallen to about 42 mmscmd against the target of 80 mmscmd, creating a severe shortage of gas for power, fertilizer and other units, which are being forced to import costly LNG.