Reliance Gas Dispute - Ril Remains Unscathed

By Author: Mike Smith
Total Articles: 103
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Controversies have surrounded KG D6 gas, but RIL downplayed all:

Reliance Industries operated KG-DWN-98/3 gas field, also known as KG D6 has run into controversies immediately after the major gas find in 2002. Whether it is the quantum of the discovery, capital expenditure for the development, legal tussle with NTPC over the contractual obligation or the Memorandum of Understanding (MOU) signed with Reliance Natural Resources (RNRL) for supplying 28 mmscmd gas, Reliance has witnessed numerous allegations.

RIL, however, has proven these accusations erroneous time and again. RIL had estimated the reserves of KG D6 block to the tune of 14 trillion cubic feet (tcf), which was downplayed by many to the maximum of 5-6 tcf. Today, with limited number of wells drilled, the commercially recoverable reserves are approved at 11.3 tcf by the Government. The in-place reserves are estimated to the extent of 40 tcf by various analysts. Similarly, the capital expenditure of $8.8 billion was said to be escalated. The Government, however, itself came forward in defense of the accusation arguing that the reserve estimates ...
... along with peak production level has doubled since the initial development plan resulting in increased capital cost due to three-fold rise in commodity prices, equipment prices, rig charges and engineering cost.

As far as NTPC issue is concern, RIL has made it clear that disagreement with NTPC is not on the price of $2.34 per mmbtu but on unlimited liability clause which coerces the RIL to pay for entire cost of substitute fuel in case of gas supply failure even in case of force-majeure by the company. RIL only wants the penalty charges to be capped that too as low as half of what is applicable for NTPC in case of its inability to off-take the gas, which may force the RIL to flare a sizable amount of precious gas.

Even in case of RNRL, RIL agrees to supply the said quantity of gas at agreed price provided the Government consents on price and marketing freedom. In fact, RIL tried to get the Government certification for price of gas to be supplied to RNRL, however, the latter rejected the same, stating that the price did not match the arms-length criteria of pricing as per the Production Sharing Contract (PSC).

In spite of all this, RIL remains impervious. With KG gas flowing in, the gas-based power generation across the country has registered a healthy turnaround. A look at the region-wise operation efficiencies shows that the plants in south India had a PLF of over 71 per cent during April-October this year, as against 50.05 per cent year-on-year. The corresponding figures for the western region were 63 per cent and 57 per cent, while for the north it was 74 per cent versus 64 per cent.

About the Author:
Oil & Gas from the KG - D6 project of Reliance, the largest discovery in recent times and another feather in the cap for Mukesh Ambani controlled Reliance Industries which is India's largest and most successful private sector conglomerate marred only by Reliance Gas Dispute. RIL, however, has proven these accusations erroneous time and again.