Lok Sabha Question No. 2582 (UNSTARRED), answered on 2016-03-14
Subject: Performance Audit for KG Basin
Ministry: PETROLEUM AND NATURAL GAS
Asked by: NANDI YELLAIAH

## LOK SABHA UNSTARRED QUESTION NO. 2582 TO BE ANSWERED ON 14 th  March, 2016

## Performance Audit for KG Basin

## 2582: SHRI NANDI YELLAIAH:

## पेट्रोलियम एवं प्राक ृ तिक गैस मंत्री

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

- (a) whether the Reliance Industries Limited (RIL) has violated all its contractual commitments resulting in loss to exchequer in its operation in D6 block of the Krishna Godavari Basin;
- (b) if so, the details thereof along with action taken by the Government against RIL;
- (c) whether the performance audit was carried out for oil and gas exploration in KG basin with regard to RIL and loss incurred by the Government during the last three years and the current year in view of the Government having discarded Production Sharing Contract (PSC); and
- (d)  if so, the names of the companies which have allegedly violated the terms of PSC along with the various measures adopted to regularize the losses incurred in the said project including financial penalty imposed on RIL and cancellation/taking over some of area allotted to RIL?

## ANSWER

## पेट्रोलियम एवं प्राक ृ तिक गैस मंत्रािय में राज्य मंत्री ( स्विंत्र प्रभार ) ( धमेन्द्र प्रधान )

MINISTER OF STATE (INDEPENDENT CHARGE) IN THE  MINISTRY OF PETROLEUM & NATURAL GAS (SHRI DHARMENDRA PRADHAN):

(a)& (b) 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 has failed to adhere to approved Field Development Plan in terms of drilling adequate number of wells and putting on stream the required number of wells and consequent achievement of projected gas production profile in AIDP. This has led to underutilization of facilities and surplus inventories. This  Ministry  vide  its  letters  dated  02.05.2012,  10.09.2013,  14.11.2013  and  10.07.2014 disallowed development cost based on the cumulative shortfall in production of gas vis-a-vis production estimates under the approved AIDP (Addendum to Initial Development Plan) for corresponding years incurred by the Contractor. The total disallowed development costs as on 31 st March,  2014  amounts  to  US  $2.376  billion.  As  a  result,  contractor  is  liable  to  pay additional profit petroleum of USD 195,341,957 to the Government for the period upto the year 2013-14.   In pursuance to the provisions contained in the New Domestic Natural Gas Pricing Guidelines, 2014, GAIL has been depositing the difference between the price prevailing before the issue of guidelines and that notified subsequently from time to time in a Gas Pool Account (GPA).    Government  has  directed  GAIL  to  continue  depositing  differential  amount  in  GPA towards additional profit petroleum due to the Government.

(c) : Yes, Madam.  CAG has conducted audit of the block KG-DWN-98/3 for the years 200607  to  2011-12  and  has  submitted  its  reports  (Report  No.19  and  24)  which  is  available  on website.  C&AG has pointed out several deficiencies including these related to procurements made in the block.  The two reports bring out regulatory and control issues, discovery related issues, procurement related issues etc.  The audit observations entail disallowance of some of the contract costs.

(d) :  Non-compliance of contractual provisions, if any, is dealt in accordance with stipulations laid  down  in  the  Production  Sharing  Contract  and  extant  Policies  of  Government.    However, major  PSC  violations  like  change  of  ownership  without  approval,  non-submission  of  bank guarantee, submission of false information etc. attract major penalties including termination of contract.  Under the PSC regime, till now major PSC violations have been observed in a few blocks  /  fields.    Government  has  taken  appropriate  actions  in  such  cases.    The  details  are annexed as Annexure.

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## ANNEXURE

| Block/Field     | Operator                                        | PSC Violation Details (PSC Article)                                                                   | Action Taken                            |
|-----------------|-------------------------------------------------|-------------------------------------------------------------------------------------------------------|-----------------------------------------|
| MZ-ONN- 2004/2  | Naftogaz                                        | Submission of False Information ( NIO / PSC Article 30.3a)                                            | PSC Terminated                          |
| AA-ONN- 2004/4  | Naftogaz                                        | Submission of False Information ( NIO / PSC Article 30.3a)                                            | PSC Terminated                          |
| CB-ONN- 2004/5  | Naftogaz                                        | Submission of False Information ( NIO / PSC Article 30.3a)                                            | PSC Terminated                          |
| AA-ONN- 2010/1  | Prize Petroleum Company Ltd.                    | Non-Submission of Bank Guarantee(Article 29)                                                          | PSC Terminated                          |
| CB-ONN- 2005/8  | Vasundhara Resources Ltd.                       | Non-Submission of Bank Guarantee(Article 29)                                                          | PSC Terminated                          |
| DS-ONN- 2004/1  | Geo-Global Resources                            | Non-Submission of Bank Guarantee(Article 29)                                                          | PSC Terminated                          |
| Amgui Field     | Canaro Resources                                | Transfer of Participating Interest ( Article 29 &31.3e )                                              | PSC Terminated                          |
| Sanganpur Field | M/s Hydrocarbon Development Co. Private Limited | BG against WP & Budget 2015-16 not submitted by the Operator within PSC time frame. [Article 30.3(a)] | Bank Guarantee of the Operator invoked. |

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