In a first, govt asks RIL to pay Rs 7,000 crore for poor gas output

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    nitesh Mob Control Manager Stars and Ambassadors

    Feb 12, 2009
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    In a first, govt asks RIL to pay Rs 7,000 crore for poor gas output - The Times of India

    NEW DELHI: In a first of its kind, the oil ministry has slapped a notice of $1.2 billion, or Rs 7,000 crore, on Mukesh Ambani's Reliance Industries Ltd for a sharp fall in gas output from its showcase Andhra offshore field.

    The notice, served on Wednesday, says the company would not be allowed to recover from sale of gas the cost of its investments worth $457 million made in the field in 2010-11 and $778 million in 2011-12. This the first notice of this kind that has been served on an oil/gas producer by the ministry.

    Government's contracts for auctioned fields allow companies to fully recover their investments from sale of oil or gas. The ministry has been forced to act against Reliance since the company failed to achieve the target of gas production from the KG-D6 field set in the contract.

    Gas volumes have dropped to 27 mcmd (million cubic metres per day) against 62 mcmd committed by Reliance while securing approval for its $8.8 billion investment plan for developing the field. Reliance has so far invested $5.6 billion and recovered nearly all of it. It has blamed changes in geological factors and the frontier nature of the field for the sharp drop in output, less than half of what was set as the target.

    The notice does not mean that Reliance would have to return this amount to the government immediately as it has already served an arbitration notice on the ministry on November 24, 2011.

    In its notice, the ministry has refused to join arbitration but said there is a dispute over how much of cost can be recovered because of the fall in gas production.

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