Directorate General of Hydrocarbons still considers old rate for clearance of discoveries
Though the Cabinet Committee on Economic Affairs (CCEA) has decided to double the price of domestic gas to $ 8.4 million British thermal units (mBtu), the Directorate General of Hydrocarbons ( DGH) is still considering the older rate — $4.2 an mBtu — for clearance of discoveries.
On December 10, 2013, DGH had rejected two discoveries of the MukeshAmbani- led Reliance Industries Ltd ( RIL) — D39 and D41 in the KG- DWN2003/ 1 block — that had made declarations of commerciality (DoCs) on the basis of the older gas price, calling those unviable.
This was even as the government had on June 27 decided to double the domestic gas price. Besides, on December 19, it also cleared the decks for a higher rate for RIL, despite a shortfall in production from the company’s KG- D6 fields, provided a bank guarantee to cover the shortfall was furnished (unless it was proved there was an intentional hoarding of gas). A three- member committee is to monitor the quantum of production shortfall from the D1 and D3 fields and decide the amount of bank guarantee to be given by the company. A notification on this is likely to be made shortly.
According to a source close to the development, DGH had stuck to its stand of January — that the D39 and D41 discoveries were unviable — and had not considered a review even after the CCEA decision to go for the Rangarajan pricing formula and double the gas price from April 2014. Based on a DoC filed by RIL in January 2013, DGH had said: “ D39 and D41 generated negative net present value ( NPV) of $ 520 million, considering the incurred cost of $ 305 million.” Also, it turns out, DGH decided not to review its stand even as the Planning Commission, in its half- yearly review of on the energy sector in September, batted for the new gas price as the basis for New Exploration Licensing Policy ( Nelp) fields’ pricing. According to a source close to the development, the Planning Commission Member (energy) had said: “ Some of the Nelp fields that were not viable at the price of $ 4.2 an mBtu might be viable under the price recently announced by the government.” RS Sharma, former ONGC chairman & chairman of Ficci’s hydrocarbons committee, said: “As of today, no official channel can say the price is going to be $8.4 an mBtu. There is no notification in this regard to say the price will be exactly $ 8.4 anmBtu. They have gone on the basis of the current situation. No one wants to take a futuristic decision that might land one in trouble.”
Gas price hike to benefit RIL, scrap KG basin contract: CPI leader tells SC
Maintaining that the government decision to double the natural gas price was to benefit Reliance Industries (RIL), CPI MP Gurudas Dasgupta has urged the Supreme Court (SC) to order termination proceedings against the company over extraction of natural gas from the KG basin.
In his latest affidavit, Dasgupta has also disputed the credentials of members of the Rangarajan Committee that favoured a new formula for fixing the price of natural gas, leading to a near-doubling of prices to around $8.4 per million British thermal units.
The affidavit points out that J Mauskar, former special secretary and a member of the committee, joined Observer Research Foundation, a think tank funded by Reliance, after the report was submitted. “It shows there is a clear quid pro quo: the member of the so-called expert committee has joined the company that benefits from its recommendations,” claims the affidavit filed in response to the stand taken by the government, petroleum minister Veerappa Moily and RIL.
Earlier, the government had defended its “policy decision” to hike the gas price while refuting that the decision was “Reliance-centric” or that Moily batted for the company. It also sought dismissal of the PIL, contending issues relating to reduction in production of gas and under-utilisation of facilities by RIL were a subject-matter of pending arbitration proceedings and hence, they could not be raised in the PIL. RIL also sought dismissal of the PIL, arguing that Dasgupta had no locus in the matter.
Moily had said he was made a party to the case only to “sensationalise the issue and to draw political mileage” and that his name should be deleted.
Dasgupta’s affidavit requests the court to summon all pertinent records from the Petroleum Ministry to ascertain the veracity of his claims regarding “malafides” of Moily. “Overruling senior officers of the ministry repeatedly when every such decision resulted in huge profits for Reliance cannot be camouflaged as detailed consultation,” it reads. Dasgupta also sought a probe by the court into the alleged about-turn by the government, which earlier maintained it was taking actions to penalise the company but is now supporting increase in price against a bank guarantee. “The reasons for this about-turn need be to gone into and the Hon’ble Court should call for the records of the Finance Ministry to ascertain what prompted these changes,” he said.
“The power of the government in fixing gas prices is not being questioned. What is doubtful is whether this power has been used in a fair and judicious manner. The action of the Petroleum Minister in repeatedly overruling his senior officers in all matters relating to this petition is well-documented. Thus, the entire exercise has been a colourable exercise of power by the government with the sole intention of giving benefit to Reliance,” says the affidavit.
Though the Cabinet Committee on Economic Affairs (CCEA) has decided to double the price of domestic gas to $ 8.4 million British thermal units (mBtu), the Directorate General of Hydrocarbons ( DGH) is still considering the older rate — $4.2 an mBtu — for clearance of discoveries.
On December 10, 2013, DGH had rejected two discoveries of the MukeshAmbani- led Reliance Industries Ltd ( RIL) — D39 and D41 in the KG- DWN2003/ 1 block — that had made declarations of commerciality (DoCs) on the basis of the older gas price, calling those unviable.
This was even as the government had on June 27 decided to double the domestic gas price. Besides, on December 19, it also cleared the decks for a higher rate for RIL, despite a shortfall in production from the company’s KG- D6 fields, provided a bank guarantee to cover the shortfall was furnished (unless it was proved there was an intentional hoarding of gas). A three- member committee is to monitor the quantum of production shortfall from the D1 and D3 fields and decide the amount of bank guarantee to be given by the company. A notification on this is likely to be made shortly.
According to a source close to the development, DGH had stuck to its stand of January — that the D39 and D41 discoveries were unviable — and had not considered a review even after the CCEA decision to go for the Rangarajan pricing formula and double the gas price from April 2014. Based on a DoC filed by RIL in January 2013, DGH had said: “ D39 and D41 generated negative net present value ( NPV) of $ 520 million, considering the incurred cost of $ 305 million.” Also, it turns out, DGH decided not to review its stand even as the Planning Commission, in its half- yearly review of on the energy sector in September, batted for the new gas price as the basis for New Exploration Licensing Policy ( Nelp) fields’ pricing. According to a source close to the development, the Planning Commission Member (energy) had said: “ Some of the Nelp fields that were not viable at the price of $ 4.2 an mBtu might be viable under the price recently announced by the government.” RS Sharma, former ONGC chairman & chairman of Ficci’s hydrocarbons committee, said: “As of today, no official channel can say the price is going to be $8.4 an mBtu. There is no notification in this regard to say the price will be exactly $ 8.4 anmBtu. They have gone on the basis of the current situation. No one wants to take a futuristic decision that might land one in trouble.”
Gas price hike to benefit RIL, scrap KG basin contract: CPI leader tells SC
Maintaining that the government decision to double the natural gas price was to benefit Reliance Industries (RIL), CPI MP Gurudas Dasgupta has urged the Supreme Court (SC) to order termination proceedings against the company over extraction of natural gas from the KG basin.
In his latest affidavit, Dasgupta has also disputed the credentials of members of the Rangarajan Committee that favoured a new formula for fixing the price of natural gas, leading to a near-doubling of prices to around $8.4 per million British thermal units.
The affidavit points out that J Mauskar, former special secretary and a member of the committee, joined Observer Research Foundation, a think tank funded by Reliance, after the report was submitted. “It shows there is a clear quid pro quo: the member of the so-called expert committee has joined the company that benefits from its recommendations,” claims the affidavit filed in response to the stand taken by the government, petroleum minister Veerappa Moily and RIL.
Earlier, the government had defended its “policy decision” to hike the gas price while refuting that the decision was “Reliance-centric” or that Moily batted for the company. It also sought dismissal of the PIL, contending issues relating to reduction in production of gas and under-utilisation of facilities by RIL were a subject-matter of pending arbitration proceedings and hence, they could not be raised in the PIL. RIL also sought dismissal of the PIL, arguing that Dasgupta had no locus in the matter.
Moily had said he was made a party to the case only to “sensationalise the issue and to draw political mileage” and that his name should be deleted.
Dasgupta’s affidavit requests the court to summon all pertinent records from the Petroleum Ministry to ascertain the veracity of his claims regarding “malafides” of Moily. “Overruling senior officers of the ministry repeatedly when every such decision resulted in huge profits for Reliance cannot be camouflaged as detailed consultation,” it reads. Dasgupta also sought a probe by the court into the alleged about-turn by the government, which earlier maintained it was taking actions to penalise the company but is now supporting increase in price against a bank guarantee. “The reasons for this about-turn need be to gone into and the Hon’ble Court should call for the records of the Finance Ministry to ascertain what prompted these changes,” he said.
“The power of the government in fixing gas prices is not being questioned. What is doubtful is whether this power has been used in a fair and judicious manner. The action of the Petroleum Minister in repeatedly overruling his senior officers in all matters relating to this petition is well-documented. Thus, the entire exercise has been a colourable exercise of power by the government with the sole intention of giving benefit to Reliance,” says the affidavit.
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