RIL, Part­ners Fo­cus on Deep Sea Fields, may With­draw Ar­bi­tra­tion Against Govt

Cos in­vite bids from con­trac­tors; quotes to help as­sess field devel­op­ment costs that have fallen dra­mat­i­cally

The Economic Times - - Companies - San­jeev.Choud­hary @times­group.com

New Delhi: Re­liance In­dus­tries (RIL) and its part­ners BP and Niko have for­mally started the process of de­vel­op­ing their deep sea fields, which in­dus­try ex­ec­u­tives say sig­nals their in­ten­tion to with­draw ar­bi­tra­tion against the gov­ern­ment — a nec­es­sary con­di­tion if they want to charge mar­ket price for nat­u­ral gas.

Re­liance, on be­half of the con­sor­tium, pub­lished a no­tice on Tues­day invit­ing ex­pres­sion of in­ter­est from con­trac­tors for engi­neer­ing, de­sign and a turnkey con­tract for the devel­op­ment of the fields, in­clud­ing un­de­vel­oped fields in the KG-D6 basin. The bid­ders have un­til April 29 to sub­mit their in­ter­est.

The bids will help Re­liance as­sess afresh the field devel­op­ment costs that have dra­mat­i­cally fallen since the com­pany last pre­pared it a few years ago. The two-thirds fall in oil prices in two years has slashed oil­field ser­vices rates as oil firms across the world have cut down drilling, leav­ing equip­ment idling and there­fore, cheaper. Af­ter re­ceiv­ing quotes from the ven­dors, Re­liance will pre­pare new field devel­op­ment plans and sub­mit it to reg­u­la­tor, the Direc­torate Gen­eral of Hy­dro­car­bons (DGH), af­ter a few months, sources said.

“The re­cent re­forms an­nounced by the gov­ern­ment of In­dia will pro­vide the much needed im­pe­tus to the In­dian oil and gas in­dus­try. To­gether with our part­ners, we are work­ing with the gov­ern­ment to progress ac­tiv­i­ties in our blocks,” BP said in an email. Re­liance In­dus­tries didn’t com­ment for the story. Last month, the gov­ern­ment an­nounced a new pol­icy mea­sure that links prices of gas from un­de­vel­oped dif­fi­cult fields such as deep sea and high pres­sure-high tem­per­a­ture ar­eas to al­ter­nati- ve fu­els, ef­fec­tively dou­bling the prices. While the max­i­mum price avail­able to do­mes­tic nat­u­ral gas is $3.06 per unit, dif­fi­cult fields can avail $6.61per unit as gas price, ac­cord­ing to the lat­est prices an­nounced by the oil min­istry

The pol­icy, how­ever, bars fields from avail­ing higher prices where the op­er­a­tor is en­gaged in lit­i­ga­tion against the gov­ern­ment, chal­leng­ing the lat­ter’s au­thor­ity to fix gas prices. This would hurt Re­liance un­til it withdraws its ar­bi­tra­tion against the gov­ern­ment. Top ex­ec­u­tives of Re­liance and BP have met gov­ern­ment of­fi­cials re­cently to dis­cuss plans to de­velop dis­cov­er­ies af­fec- ted by the new pol­icy.

In­dus­try ex­ec­u­tives said the no­tice seek­ing ven­dors strength­ens the idea that Re­liance and part­ners may now be ready to aban­don the ar­bi­tra­tion against the gov­ern­ment although a lawyer for RIL didn’t drop a hint in this re­gard dur­ing a court hear­ing on the mat­ter on Mon­day. The com­pany has ini­ti­ated ar­bi­tra­tion against gov­ern­ment’s moves to deny re­cov­ery of some costs and over the gas-pric­ing regime of the gov­ern­ment.

The new pol­icy on gas prices can po­ten­tially ben­e­fit Re­liance’s eight dis­cov­er­ies with re­serves of 2.53 tril­lion cu­bic feet of gas. Re­liance, mean­while, has sub­mit­ted to the DGH the pro­pos­als for dec­la­ra­tion of com­mer­cial­ity of some of its dis­cov­er­ies af­fected by this pol­icy, in­clud­ing R se­ries and satel­lite fields in the KG basin.

A long-stand­ing in­dus­try de­mand to raise prices for riskier and more cap­i­tal-in­ten­sive deep sea projects prompted the gov­ern­ment move that is ex­pected to push up gas out­put in the coun­try. Fol­low­ing the pol­icy change, state-run Oil and Nat­u­ral Gas Corp (ONGC) also un­veiled a $5-bil­lion plan to de­velop its deep wa­ter KG basin fields last month.

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