RIL’s cost recovery restriction would go when gas production rises: Govt

RIL's cost recovery restriction would go when gas production rises: Govt

Written by Fe Bureau | New Delhi | Published: May 4, 2012 8:33 pm

The petroleum ministry on Friday clarified that its move to disallow Reliance Industries from recovering $1 billion as development cost of its controversial D6 block in the Krishna Godavari basin for allegedly not meeting its drilling targets was only a “deferment of cost recovery.”

As and when RIL is able to step up natural gas production from the ultra deepwater block off the Andhra coast,the company would become eligible for recovery of this cost,said an official source,who asked not to be named considering the sensitivity of the matter.

The ministry on Wednesday sent a notice to Reliance restraining it from recovering $1.005 billion from the sale of gas from the field as it has not put 31 wells on production as had committed. The ministry wants to link recovery of field development expenditure to the utilisation of the infrastructure built. RIL has attributed its inability to drill so many wells to geological complexities in the country’s first ultra deepwater block that was the fastest in the world in reaching production stage after discovery.

RIL were to produce 80 million metric standard cubic metres a day (mmscmd) by April 2012 but production has now come down to 27 mmscmd. “If they manage to raise gas output,they will become entitled to recover this cost. By disallowing the recovery of $ 1 billion now,the company will only lose interest on this amount for two or three years (by the end of which,output could rise further),” said the official. One mmscmd is sufficient to produce 220 mega watt of power.

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