Reliance Industries denies allegations it hoarded gas

Mukesh Ambani’s Reliance Industries (RIL) has denied allegations that it hoarded gas by intentionally keeping the gas output low in KG-D6 gas block off the eastern shores. In a letter to Petroleum Secretary G. C. Chaturvedi, RIL’s executive director and head of oil and gas business, PMS Prasad, tacitly dared those making the allegations to prove the same.

In the letter, Mr Prasad said: “... clearing the controversy, we once again request that a team of international experts of repute be appointed to independently verify our estimates as well as the actions that have been taken by us”. Mr Prasad also said: “We have on several occasions raised the issue of appointing such technical experts so misinformation can be averted."

Recently, civil society activist Arvind Kejriwal had alleged that RIL was hoarding gas and thus causing loss to the government. Similarly, leftist leader Gurudas DasGupta also wrote to the Prime Minister about RIL artificially keeping the gas production at low levels and demanding higher gas price for ramping up production.

Countering all the allegations, RIL, in a strong worded letter, said: “Any person associated with the oil and gas industry will easily vouch that hoarding gas in the case of D1, D3 (the two gas fields in KG-D6 block) is a technical impossibility.” Prasad further said: “Oil and gas reservoirs are dynamic and not inert cold storage facilities."

Referring to the revised gas reserve estimates of 3.4 trillion cubic feet (Tcf) in KG-D6 gas block against earlier estimates of over 10 Tcf, RIL cited similar examples from ONGC, saying: “Best companies in the world, including ONGC in the Neelam gas fields (in India) and recently in the acquisition of Imperia’s assets in Russia, have also faced surprises". RIL, in the letter, said, “world over, oil and gas fields are known to be unpredictable.”

Officials in the Petroleum Ministry, speaking on the condition of anonymity, said Mr Chaturvedi has forwarded the RIL letter to the Joint Secretary in the ministry. Officials in the ministry also agreed that “unlike Gulf of Mexico, Brazil and Africa, no analog data is available in India” and that makes it more difficult for operators in the country to get estimates right.

Sources said RIL has again told the government that higher production is not possible from the present three oil and gas fields in the KG-D6 gas block. Explaining this, one of the officials said that KG-D6 block has 18 gas discoveries and one oil discovery. Out of these, only three are under production, including the one oil discovery. So, if there will be any ramp up in gas production from KG-D6 it will be from other discoveries and not the present ones.

Even in RIL’s letter, the issue of adding production is mentioned.

Mr Prasad also pointed out that the allegations that RIL was connivingly seeking approval for higher capital expenditure is wrong. Mr Prasad in his letter said that as the reserves have been downwardly revised to 3.4 Tcf, the “revised development plan has also scaled down the cost by $3 billion”. It further says, “as commercial entities, all the partners have had to face the consequences of the reserve downgrade”

RIL also said, “we have cut back all infructuous expenditure and scaled down cost estimates because all technical information now available clearly shows that adding new wells in the D1 and D3 fields will not add to production”.