Lok Sabha Question No. 2513 (UNSTARRED), answered on 2015-12-14
Subject: Violation of Contractual Commitments
Ministry: PETROLEUM AND NATURAL GAS
Asked by: NANDI YELLAIAH, JITENDRA CHAUDHURY

## LOK SABHA UNSTARRED QUESTION NO. 2513 TO BE ANSWERED ON 14 th  December, 2015

## Violation of Contractual Commitments

## 2513:  SHRI NANDI YELLAIAH: SHRI JITENDRA CHAUDHURY:

## 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) :  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 2006-07 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                          |
| Amguri 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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