Friday, August 19, 2016

Centre imposes $380 million additional penalty on RIL

Government has slapped an additional penalty of $380 million (around Rs.2,500 crore) on Reliance Industries and its partners for producing less than targeted natural gas from eastern offshore KG-D6 fields.

With this, the total penalty, which is in form of disallowing recovery of cost incurred, for missing the target in five fiscal years beginning April 1, 2010, now stands at a cumulative $2.76 billion.

The Production Sharing Contract (PSC) allows RIL and its partners BP Plc of the U.K. and Canada’s Niko Resources to deduct all capital and operating expenses from the sale of gas before sharing profit with the government. Disallowing costs will result in government’s profit share rising.


“Up to FY 2013-14, the cost recovery proposed to be disallowed was $2.376 billion and consequent demand of Government of India share of additional profit petroleum of $195.3 million on cumulative basis,” RIL said in a regulatory filing. “On June 3, 2016, the company received a revised claim up to year 2014-15 with a disallowance of $2.756 billion on cumulative basis and consequent demand of Government of India share of additional profit petroleum of $246.9 million, also on cumulative basis.”

Gas output from Dhirubhai-1 and -3 gas fields in the KG-D6 block was supposed to be 80 million standard cubic meters per day but actual production was only 35.33 mmscmd in 2011-12, 20.88 mmscmd in 2012-13 and 9.77 mmscmd in 2013-14. The output has been around 8 mmscmd in subsequent years.

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