After deciding to take back five of the eight gas discoveries in the KG D6 block from Reliance Industries (RIL), the Union petroleum ministry has now proposed to deny an increase in the gas price to the operator from next year.
A note will be sent to the Cabinet Committee on Economic Affairs next week after getting response from the power, finance and fertiliser ministries, which have supported the move, sources said.
“There was a lot of pressure from the finance and other ministries to not increase the price of gas from 2014, as the operators have not produced the projected amount of gas from the block. Even the standing committee on finance had objected the proposal of any hike in the gas price until the operators meet the production target agreed to at $4.2 per mmBtu,”said a senior petroleum ministry official, who is preparing the Cabinet note.
In June this year, the government doubled the price of natural gas in the country to $8.4 per unit effective from 2014 to encourage private investment in the gas sector.
Initially, it was expected that the new prices will be applicable for the D6 gas as well, prices for which are to be revised from April 2014.
D6 is operated by RIL (60%), British Petroleum (30%) and Nikko Resources (10%).
At the time of getting the contract, it was projected that RIL will reach the production level of 80 million metric standard cubic metre per day (mmscmd) by April 2012. However, the level is less than 20 mmscmd at present.
The Directorate General of Hydrocarbons believes that the output from D1 and D3 blocks fell to 10.12 mmscmd from 53-54 mmscmd achieved in March 2010 because RIL did not drill committed number of wells. RIL has claimed that the reserves from these blocks were overestimated and even by drilling more wells the production could not be increased.