Lok Sabha Question No. 2275 (UNSTARRED), answered on 2015-08-03
Subject: Violation of Contractual Commitments
Ministry: PETROLEUM AND NATURAL GAS
Asked by: MD. BADARIDDOZA KHAN, NEELAM SONKER

**LOK SABHA**

**UNSTARRED QUESTION NO. 2275**

**TO BE ANSWERED ON 3** **rd** **AUGUST, 2015**

**VIOLATION OF CONTRACTUAL COMMITMENTS**

**2275 :  SHRI MD. BADARUDDOZA KHAN:**

**SHRIMATI NEELAM SONKER:**

**पेट्रोलियम एवं प्राकृतिक गैस मंत्री**

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

1. The current levels of production of oil and gas from Krishna Godavari (KG) D6 oil fields by public and private sector companies including Reliance Industries Limited (RIL);

1. The names of the companies which have allegedly violated the terms of Production Sharing Contract (PSC) and the punitive action taken by the Government against such companies, including penalty imposed / recover from various companies, oil fields / company-wise including KGD6,

1. The present fixation of formula of natural  gas being produced from KG D6 and other oil fields in the country along with actual shortfall/ irregularities in supply of gas to various gas based industries from KG-D6 block and action taken by the Government in this regard; and

1. The royalty got by the Government so far from each oil fields?

***ANSWER***

**पेट्रोलियम एवं प्राकृतिक गैस मंत्रालय में राज्य मंत्री (स्वतंत्र प्रभार)**

**(धर्मेन्द्र प्रधान)**

MINISTER OF STATE (INDEPENDENT CHARGE) IN THE

MINISTRY OF PETROLEUM & NATURAL GAS

(SHRI DHARMENDRA PRADHAN):

**(a)** The KG-DWN-98/3 (KG-D6) oil and gas field is being operated by M/s Reliance Industries Limited (RIL).

The production of oil and natural gas from the block KG-D6 are as under:

|                                  | **KG-DWN-98/3 (KG-D6)**   |         |
|----------------------------------|---------------------------|---------|
|                                  | **Natural Gas**           | **Oil** |
| **Year**                         | (MMSCM)                   | (TMT)   |
| **2014-15**                      | 4461.908                  | 266.659 |
| **2015-16 (**  April-June, 2015) | 1034.671                  | 60.745  |

**MMSCM** = Million Standard Cubic meter

**TMT** = Thousand Meteric Tonnes

**(b)** The details are as per the Annexure-I.

**(c)** The details are as per the Annexure-II.

**(d)** The details are as per the Annexure-III.

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**ANNEXURE-I**

The details of the blocks / fields where major PSC violations have taken place and the action taken by the Government is given below:

| **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                          |
| Amguri Field      | Canoro 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. |

The Government has issued notices to the contractor in the block KG-DWN-98/3 (KG D6) vide its letters dated 02.05.2012, 10.09.2013, 14.11.2013 and 10.07.2014 disallowing a part of 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 of above disallowance of a portion of contract cost, contractor is liable to pay additional profit petroleum of USD 195,341,957 to the Government for the period upto the year 2013-14.

Further, Government of India, while approving the revision of the price of the domestically produced natural gas, also decided that the difference between the revised price and then prevailing price (US $ 4.2/mmbtu) would be credited to the gas pool account maintained by GAIL. Further, Government has directed GAIL on 02.03.2015 to deposit the amount being credited to the gas pool account maintained by GAIL w.e.f. 01.11.2014, to the Government’s exchequer towards the additional profit petroleum of US$195.34 million due and payable by the Contractor. GAIL has also been directed to keep on depositing the amounts to the Government’s Revenue Account on monthly basis till the amount of additional profit petroleum due to Government is fully recovered.  Accordingly, GAIL has deposited Rs.367.86 crores towards the additional profit petroleum with GOI till June, 2015.

***********************

**ANNEXURE-II**

MoP&NG has issued the New Domestic Natural Gas pricing Guidelines, 2014 for determination of domestic natural gas price on half yearly basis.  These Guidelines specify the formula for the Domestic Natural Gas Price calculation which is as follows:

P   =   (V HH P HH + V AC P AC + V NBP P NBP + V R P R ) / (V HH + V AC + V NBP + V R )

Where,

1. V HH = Total annual volume of natural gas consumed in USA & Mexico.
2. V AC = Total annual volume of natural gas consumed in Canada.
3. V NBP = Total annual volume of natural gas consumed in European Union (EU) and Former Soviet Union (FSU) countries, excluding Russia.
4. V R = Total annual volume of natural gas consumed in Russia.
5. P HH and P NBP are the annual average of daily prices at Henry Hub (HH) and National Balancing Point (NBP) respectively, less US$ 0.50/MMBTU towards transportation and treatment charges.
6. P AC and P R are the annual average of monthly prices at Alberta Hub and Russia (as published by Federal Tariff of the Russian Government or equivalent source) respectively, less US$ 0.50/MMBTU towards transportation and treatment charges.

The EGoM has allocated about 63.26 MMSCMD of gas from KG-DWN-98/3 (KG D6).  However, due to consistent decline in gas production from KG D6, at present, the entire gas being produced from KG-D6 block, which is around 10-11 MMSCMD, is being supplied to Fertilizers sector which has been accorded the highest order of priority in gas utilization policy for KG D6 / NELP gas.

******************

**ANNEXURE-III**

Royalty received under the Production Sharing Contracts (PSCs) regime by the Government of India / State Government till 31.03.2015, Block wise/field wise is as follows:

| **Location Area**            | **Field/Block\_Name**               | **Total (Crores)**   |
|------------------------------|-------------------------------------|----------------------|
| **Arunanchal Pradesh**       | Kharsang                            | 60.00                |
|                              | OIDB (Differential Royalty Payment) | 357.29               |
| **Arunanchal Pradesh Total** |                                     | **417.29**           |
| **Assam**                    | AMGURI                              | 8.81                 |
|                              | OIDB (Differential Royalty Payment) | 21.55                |
| **Assam Total**              |                                     | **30.36**            |
| **Eastern Offhore**          | KG-DWN-98/3                         | 2911.64              |
|                              | PY-1                                | 56.00                |
|                              | PY-3                                | 308.34               |
|                              | Ravva                               | 2226.90              |
| **Eastern Offshore Total**   |                                     | **5502.88**          |
| **Gujarat**                  | Allora                              | 0.05                 |
|                              | Asjol                               | 1.93                 |
|                              | Bakrol                              | 13.73                |
|                              | Baola                               | 0.36                 |
|                              | Bhandut                             | 1.10                 |
|                              | Cambay                              | 1.40                 |
|                              | CB-ON/2                             | 6.75                 |
|                              | CB-ON/3                             | 2.83                 |
|                              | CB-ON/7                             | 21.50                |
|                              | CB-ONN-2000/1                       | 99.20                |
|                              | CB-ONN-2000/2                       | 30.52                |
|                              | CB-ONN-2002/3                       | 0.08                 |
|                              | Dholasan                            | 0.05                 |
|                              | Dholka                              | 23.89                |
|                              | HAZIRA (Onshore)                    | 287.75               |
|                              | Indrora                             | 0.66                 |
|                              | KANAWARA                            | 2.82                 |
|                              | Lohar                               | 3.20                 |
|                              | North Balol                         | 3.02                 |
|                              | North Kathana                       | 0.18                 |
|                              | OIDB (Differential Royalty Payment) | 320.09               |
|                              | Sabarmati                           | 0.27                 |
|                              | Sanganpur                           | 0.06                 |
|                              | Unawa                               | 0.28                 |
|                              | Wavel                               | 1.35                 |
| **Gujarat Total**            |                                     | **823.06**           |
| **Rajasthan**                | RJ-ON/6                             | 47.74                |
|                              | RJ-ON-90/1                          | 21101.03             |
| **Rajasthan Total**          |                                     | **21148.77**         |
| **Western Offshore**         | CB-OS/2                             | 1008.10              |
|                              | Hazira (Offshore)                   | 243.07               |
|                              | M & S Tapti                         | 2450.48              |
|                              | Panna-Mukta                         | 3067.11              |
| **Western Offshore Total**   |                                     | **6768.76**          |
| **Grand Total**              |                                     | **34691.12**         |

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