Government disallows RIL expense on KG-D6

Petroleum and Natural Gas Minister M. Veerappa Moily on Tuesday said the government has disallowed the $1 billion expenditure of Reliance Industries on the flagging KG-D6 gasfields for not implementing the approved field development plan.

In a written reply in the Rajya Sabha, he said the average gas production from KG-DWN-98/3 (KG-D6) block during the current fiscal up to October stood at about 29.81 million standard cubic meter per day, which is well below the 86.73 MMSCMD approved in the Field Development Plans of D1, D3 & MA fields in this block, which are currently on production.

The output has dropped after hitting a peak of about 62 MMSCMD in August 2010.     Moily said the output has fallen because one-third of the wells on D1, D3 gas fields as well as on Ma oil and gas field have ceased to produce due to water loading sand ingress in wellbores.

“The Government has not accepted the contention of the contractor RIL and have ordered proportionate disallowance of cost of production facilities amounting to $1.005 billion for not fully implementing approved development plan,” he added.

Following this, RIL has initiated arbitration proceedings.