Lok Sabha Question No. 2971 (UNSTARRED), answered on 2017-03-20
Subject: Production in KG Basin
Ministry: PETROLEUM AND NATURAL GAS
Asked by: MANSUKHBHAI DHANJIBHAI VASAVA, CHANDRAKANT BHAURAO KHAIRE, M. UDHAYAKUMAR, HARISHCHANDRA DEORAM CHAVAN, POONAMBEN HEMATBHAI MAADAM, RAMDAS CHANDRABHANJI TADAS

## GOVERNMENT OF INDIA

## MINISTRY OF PETROLEUM AND NATURAL GAS

## LOK SABHA UNSTARRED QUESTION NO. 2971 TO BE ANSWERED ON 20 th  March, 2017

## Production in KG Basin

## †2971. SHRI MANSUKHBHAI DHANJIBHAI VASAVA:

SHRI CHANDRAKANT KHAIRE:

ADV. M. UDHAYAKUMAR:

SHRI HARISHCHANDRA CHAVAN:

SHRIMATI POONAMBEN MAADAM:

SHRI RAMDAS C. TADAS:

पैट्रोलियम व प्राक ृ लिक गैस मंत्री

Will the Minister of PETROLEUM AND NATURAL GAS be pleased to state:

- (a) whether the production of natural gas and petroleum products in Krishna Godavari (KG) Basin in six areas is not being carried out by various companies and if so, the details thereof, company-wise;
- (b) the details of contract and agreement signed with public/private sector companies and operator to extract petroleum and natural gas from KG Basin, company-wise;
- (c)  the  status  of  oil  and  natural  gas  production  from  KG  Basin  along  with  the production cost in KG basin as compared to other oil and gas fields during the last three years and the current year, companywise;
- (d)  the  percentage  of  production  carried  out  during  the  said  period  along  with  the name of the companies responsible for producing less than targeted oil and natural gas from KG basin including eastern offshore KG D6 fields, company-wise;
- (e) the number of cases of violation of the said contract/agreement reported during the said period and the action taken by the Government in this regard; and
- (f)  whether  the  Government  has  imposed  penalty  for  missing  the  production  target and violation  of  contract  since  beginning  of  KG  Basin  and  if  so,  the  details  thereof along with the steps taken by the Government to recover the penalty amount dues to companies, company-wise?

## ANSWER

पेट्रोलियम और प्राक ृ लिक गैस मंत्रािय में राज्य मंत्री ( स्विन्त्त्र प्रभार ) ( श्री धमेन्त्र प्रधान )

MINISTER OF STATE (I/C) IN THE MINISTRY OF PETROLEUM & NATURAL GAS (SHRI DHARAMENDRA PRADHAN)

- (a) Oil & Natural Gas Corporation Ltd. (ONGC) has provided details of six fields where production is not carried out at present. The details are as given as Annexure-I .

(b) In KG Basin, A total of 39 exploration block/field have been awarded in On-land (4), Deep Water (18) and Shallow Water (17) covering an area of 205634.76 square kilometers  to various companies based on current operatorship  viz. Oil and Natural Gas  Corporation  Ltd.  (18),  Reliance  Industries  Ltd.  (12),  Cairn  India  Ltd.  (3),  BP Exploration (Alpha), UK (1), British Gas Exploration and Production (India) Ltd., UK (1),  Gujarat  State  Petroleum  Corporation  Ltd.  (2),  Hardy  Exploration  &  Production (India) Inc. (1) and Oil India Ltd. (1).

A total of 27 blocks have been relinquished by various companies based on current operatorship viz. Reliance Industries Ltd. (11), Oil and Natural Gas Corporation Ltd. (12), Hardy Exploration & Production (India) Inc. (1),  Cairn India Ltd. (1), BP Exploration (Alpha), UK (1) and British Gas Exploration and Production (India) Ltd.,  UK  (1)  .  Other  two  blocks  have  been  proposed  for  relinquishment  by  the operators.

| Operator    | District                   | Operational   | Proposed for Relinquishment   | Relinquished   |   Grand Total |
|-------------|----------------------------|---------------|-------------------------------|----------------|---------------|
| GSPC        | W.Godavari & Krishna       |               | 1                             |                |             1 |
| ONGC        | Krishna and Guntur         | 1             |                               |                |             1 |
| OIL         | East.Godavari & Yanam (UT) | 1             |                               |                |             1 |
| RIL         | Guntur,Prakas ham, Krishna |               |                               | 1              |             1 |
| BP          | -                          |               |                               | 1              |             1 |
| BG          | -                          |               |                               | 1              |             1 |
| CAIRN       | -                          | 2             |                               | 1              |             3 |
| GSPC        | -                          | 1             |                               |                |             1 |
| Hardy       | -                          |               |                               | 1              |             1 |
| ONGC        | -                          | 4             | 1                             | 12             |            17 |
| RIL         | -                          | 1             |                               | 10             |            11 |
| Grand Total | Grand Total                | 10            | 2                             | 27             |            39 |

(c). The  details  of  oil  and  natural  gas  production  from  KG  Basin  along  with  the production cost in KG basin as compared to other oil and gas fields during the last three years and the current year are given as Annexure-II .

(d). Oil and gas production in KG basin is currently being realized from Ravva field, operated by M/s Cairn Energy Ltd., D1, D3 and MA fields in KG-DWN-98/3 (KG-D6) block, operated by M/s Reliance Industries Ltd., KG-OSN-2001/3 Block operated by Gujarat  State  Petroleum  Corporation  (GSPC)  and  Onshore  &  Offshore  Nomination blocks of Oil & Natural Gas Corporation Ltd. (ONGC). The actual production of oil and natural  gas  from  these  fields/blocks  during  last  three  years  and  the  current  year against target is given as Annexure-III .

(e). The number of cases of violation of the said contract/agreement reported during the said period alongwith the action taken by the Government in this regard is given as Annexure-IV.

(f). M/s Reliance Industries Ltd. is the operator of deepwater KG-DWN-98/3 (KG-D6) block.  The  gas  production  from  D1  &  D3  fields  in  this  block  is  much  less  than  the production  rates  approved  in  addendum  to  Initial  Development  Plan  (AIDP).  The Contractor had set up production facilities to produce gas to a maximum level of 80 MMSCMD, but has failed to adhere to approved Field Development Plan in terms of drilling and  putting  on stream  the required  number  of  wells  and  consequent achievements  of  projected  gas  production  profile  in  AIDP.  This  has  led  to  underutilization  of  facilities  and  surplus  inventories.  Government  of  India  issued notice for proportionate disallowance of cost of production facilities based on cumulative shortfall in gas production vis-à-vis AIDP targets.

Ministry of Petroleum & Natural Gas on 03.06.2016, has disallowed an amount of US$ 2.756 Billion from the cumulative development cost incurred by the Contractor as on 31st March 2015. This disallowance was computed based on the cumulative shortfall in  production  of  gas  vis-a-vis  production  estimates  under  the  approved  AIDP  till 31.03.2015.  The  additional  profit  petroleum  (which  is  provisional)  payable  to  the Government by the contractor for the period up to FY 2014-15 is approximately US$ 246.9  Million.  In  the  context  of  Ministry  of  Petroleum  &  Natural  Gas  order  on disallowance,  the  contractor  has  invoked  arbitration  clause  of  Production  Sharing

Contract (PSC).

******

## Annexure-I

|   Sl. no | Name of Field   | Service Contractor                                       | Present Production   | Details/Reason                                                                                                                                                                                                                                                               |
|----------|-----------------|----------------------------------------------------------|----------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|        1 | Mulkipalli      | M/s KEI RSOS Petroleum & Energy Pvt. Ltd. led Consortium | Nil                  | After GAIL pipe line burst at Nagaram on 27.06.2014 and subsequent replacement of pipe line, there is Change in custody transfer from Ponnamanda to Tatipaka along with requirement of fulfilling PNGRB guide lines. Gas evacuation stopped due to above. Now modalities are |
|        2 | Magathapalli    | M/s KEI RSOS Petroleum & Energy Pvt. Ltd. led Consortium | Nil                  | After GAIL pipe line burst at Nagaram on 27.06.2014 and subsequent replacement of pipe line, there is Change in custody transfer from Ponnamanda to Tatipaka along with requirement of fulfilling PNGRB guide lines. Gas evacuation stopped due to above. Now modalities are |
|        3 | Sirikattapalli  | M/s KEI RSOS Petroleum & Energy Pvt. Ltd. led Consortium | Nil                  | under way for laying pipe line to custody transfer & sharing the GDU for gas evacuation.                                                                                                                                                                                     |
|        4 | Medapadu        | M/s KEI RSOS Petroleum & Energy Pvt. Ltd. led Consortium | Nil                  | Under Assessment Phase. Yet to put on production                                                                                                                                                                                                                             |
|        5 | Chintalapalli   | M/s KEI RSOS Petroleum & Energy Pvt. Ltd. led Consortium | Nil                  | Under Assessment Phase. Yet to put on production                                                                                                                                                                                                                             |
|        6 | Manepalli       | M/s BG Shirke Oil and Gas India Pvt. Ltd. led Consortium | Nil                  | Yet to put on production. Modalities are under way for pipe line hook up & sharing the GDU at Tatipaka for gas evacuation as per PNGRB.                                                                                                                                      |

Field/Block

KG-

DWN-

98/3

KG-

OSN-

2001/3

Operator

Reliance

Industries Ltd.

Gujarat State

Petroleum

Corporation Ltd.

RAVVA

Cairn Energy

India Pty Ltd.

Andhra

Pradesh/

ONGC

Offshore

(Nomination)

Total Oil Production

2013-14

274.34

0

1035.54

323

1632.88

## Annexure-II

The production of oil and natural gas from KG Basin during last three years and the current year (upto Feb, 2017) is as under:

Oil Production (TMT)

2014-15

2015-16

266.66

3.55

1102.02

272

1644.23

207.78

3.61

1019.33

322

1552.72

2016-17 (Till Feb,

17)

132.95

6.27

743.55

263

1145.77

|                          |                                          | Gas Production (MMSCM)   | Gas Production (MMSCM)   | Gas Production (MMSCM)   | Gas Production (MMSCM)   |
|--------------------------|------------------------------------------|--------------------------|--------------------------|--------------------------|--------------------------|
| Field/Block              | Operator                                 | 2013-14                  | 2014-15                  | 2015-16                  | 2016-17 (Till Feb, 2017) |
| KG- DWN- 98/3            | Reliance Industries Ltd.                 | 5050.04                  | 4461.91                  | 3939.97                  | 2641.67                  |
| KG- OSN- 2001/3          | Gujarat State Petroleum Corporation Ltd. | 0                        | 110.16                   | 134.17                   | 116.36                   |
| RAVVA                    | Cairn Energy India Pty Ltd.              | 449.53                   | 324.13                   | 260.08                   | 177.94                   |
| Andhra Pradesh/ Offshore | ONGC                                     | 1276                     | 659                      | 831                      | 1201                     |
| Total Gas Production     | Total Gas Production                     | 6775.57                  | 5555.2                   | 5165.22                  | 4136.97                  |

The  production  costs  of  companies  vary  from  field  to  field  depending  upon  size  of  the reservoir, location, logistics, availability of surface  facilities etc.  However,  the  cost  of production  of  oil  and  gas  including  levies  in  Krishna  Godavari  (KG)  basin  as  compared  to other oil and gas fields including levies is given below:

|                                         | KG Basin      | Other Basins   |
|-----------------------------------------|---------------|----------------|
| Crude Oil Production Cost (US$/bbl)     | 19.99 - 44.82 | 17.29 - 39.89  |
| Natural Gas Production Cost (US$/mmbtu) | 4.99 - 7.30   | 3.80 - 6.59    |

## Annexure-III

The actual production of oil and natural gas in KG Basin during last three years and the current year against target is as under:-

| Field/Block                                 | Year    |   Target Oil (TMT) |   Actual Oil (TMT) | % Achieve- ment   |   Target Gas (MMSCM) |   Actual Gas (MMSCM) | % Achievement   |
|---------------------------------------------|---------|--------------------|--------------------|-------------------|----------------------|----------------------|-----------------|
| KG-DWN-98/3 (Reliance)                      | 2013-14 |             405.18 |             274.34 | 67.71%            |             31793.3  |              5050.04 | 15.88%          |
| KG-DWN-98/3 (Reliance)                      | 2014-15 |             384.72 |             266.66 | 69.31%            |             32458.7  |              4461.91 | 13.75%          |
| KG-DWN-98/3 (Reliance)                      | 2015-16 |             271.49 |             207.78 | 76.54%            |             32194.8  |              3939.97 | 12.24%          |
| KG-DWN-98/3 (Reliance)                      | 2016-17 |             159.62 |             132.95 | 83.29%            |             29316.7  |              2641.67 | 9.01%           |
| KG-OSN-2001/3 (GSPC)                        | 2014-15 |              40.65 |               3.55 | 8.73%             |               470    |               110.16 | 23.44%          |
| KG-OSN-2001/3 (GSPC)                        | 2015-16 |             104.5  |               3.61 | 3.45%             |              1210    |               134.17 | 11.09%          |
| KG-OSN-2001/3 (GSPC)                        | 2016-17 |             160.3  |               6.27 | 3.91%             |              1850    |               116.36 | 6.29%           |
|                                             | 2013-14 |            1102.35 |            1035.54 | 93.94%            |               401.5  |               449.53 | 111.96%         |
|                                             | 2014-15 |             832.89 |            1102.02 | 132.31%           |               255.5  |               324.13 | 126.86%         |
|                                             | 2015-16 |             844.88 |            1019.33 | 120.65%           |               112.86 |               260.08 | 230.44%         |
| RAVVA (Cairn India)                         | 2016-17 |             763.9  |             743.55 | 97.34%            |               140.86 |               177.94 | 126.32%         |
| Onshore + Offshore Nomination Blocks (ONGC) | 2013-14 |             370    |             323    | 87.30%            |              1369    |              1276    | 93.21%          |
| Onshore + Offshore Nomination Blocks (ONGC) | 2014-15 |             253    |             272    | 107.51%           |              1429    |               659    | 46.12%          |
| Onshore + Offshore Nomination Blocks (ONGC) | 2015-16 |             292    |             322    | 110.27%           |              1607    |               831    | 51.71%          |
| Onshore + Offshore Nomination Blocks (ONGC) | 2016-17 |             276    |             263    | 95.29%            |              1257    |              1201    | 95.54%          |

## Annexure-IV

Details of cases related to contract/agreement in KG Basin are given below-

## i.  Reliance  Industries  Limited,  BP  Exploration  Alpha  Limited  and  Niko  Limited vs. Government of India (GOI)  Block KG-DWN-98/3 :

Arbitration  has  been  invoked  against  GOI  on  the  issue  of  disallowance  of  cost recovery. Claimant did not drill well for achieving production as per Development Plan and  under-utilized facilities created for production. The  Claimant  has  filed its Statement of Claim against which GOI has filed its Statement of Defence and Counter Claim. Subsequently, Claimant has filed its reply and defence to counter Claim. GOI has filed its  Rejoinder to the reply and defence of counter claim filed by Claimants. Parties  have  to  file  list  for  production  of  documents  and  time  schedule  for  further procedure to be agreed between parties. Next date of hearing is yet to be fixed.

ii.  Reliance  Industries  Limited,  BP  Exploration  Alpha  Limited  (BP)  and  Niko Limited (Niko) vs. Government of India (GOI) Block KG-DWN-98/3: Arbitration has been invoked against the demand of GOI. GOI has demanded from Contractor (RIL, BP and Niko) for unjust benefit received and unfairly retained by them on account of production of gas migrated from another blocks. Claimant has appointed Sir Bernard Eder as their nominee Arbitrator. GOI has nominated Justice G S. Singhvi, a former judge  of  Supreme  Court.  Mr.  Lawrence  Boo  has  been  appointed  as  Presiding Arbitrator. First hearing of arbitration fixing procedure timetable has been completed.

iii. Reliance  Industries  Limited,  BP  Exploration  Alpha  Limited  (BP)  and  Niko Limited (Niko) vs. Government of India (GOI) Block KG-DWN-98/3: Arbitration has been invoked on the issue of deferment of implementation of Domestic Natural Gas Pricing Guidelines 2014. GOI and Contractor have nominated their nominee Arbitrator, Justice  G.S.  Singhvi  (Retd)  and  Sir  David  Steel  respectively.      Subsequently Contractor  has  filed  Arbitrator  Petition  1/2015  before  Supreme  Court  of  India  for appointment of Presiding Arbitrator,  which  is  pending  and  likely  to  be  listed  in  third week of March 2017.