KG-D6 gas pricing freedom for RIL only if it withdraws legal suit: Govt

In a setback to Reliance Industries Ltd (RIL), the Government on Friday said the decision to allow market prices for undeveloped gas discoveries will not apply to the company’s finds in KG-D6 block unless it withdraws legal suit over gas pricing. The Cabinet Committee on Economic Affairs (CCEA) chaired by Prime Minister Narendra Modi had on Thursday allowed marketing freedom to undeveloped gas discoveries in difficult areas subject to a cap.

This freedom “will be applicable to existing discoveries where arbitration/ litigation exists directly on gas price, only after conclusion/ withdrawal of such arbitration/ litigation,” said U P Singh, Additional Secretary in the Oil Ministry in a presentation to media on Cabinet decision.

While he did not elaborate, another ministry official said that Reliance Industries Ltd will have to withdraw arbitration it filed in May 2014 challenging government authority to fix gas price. 

“We are not saying that Reliance Industries Ltd has to withdraw all arbitrations but the one challenging gas pricing guidelines will certainly has to be withdrawn before it can get benefit of the decision,” he said. Besides the arbitration on gas price, Reliance Industries Ltd has slapped arbitration over disllowance of $2.3 billion as KG-D6 output lagged targets. Another one challenges ministry’s decision to take away 814 square kilometer of eastern offshore KG-D6 area that contained five gas discoveries.

The company had its partners BP Plc of UK and Canada’s Niko Resources had in May 2014 initiated an arbitration over delay in implementing the revision of natural gas prices.  Interestingly, BP is not part of the arbitration over taking away of area after ending of contractual deadline. Asked about the decision, Oil Minister Dharmndra Pradhan said the decision of the Cabinet is very clear. 

“Gas discoveries getting the benefit should be unencumbered of any legal case. Either arbitrations or legal cases should have ended or withdrawn for getting the benefit of the decision.”  RIL has more than half a dozen undeveloped discoveries with about 3 trillion cubic feet of reserves in KG-D6. Field development plans for five of them have already been approved and are awaiting start of work.