The government has imposed a new penalty of USD 264 million (about Rs 1,700 crore) on Reliance Industries Ltd and its partners for producing less than the targeted natural gas from eastern offshore KG-D6 fields in 2015-16. The total penalty now, which is in the form of disallowing recovery of cost incurred for missing the target during six years beginning April 1, 2010, stands at USD 3.02 billion, an oil ministry official said. The Production Sharing Contract (PSC) allows RIL and its partners BP Plc of the UK and Canada’s Niko Resources to deduct all capital and operating expenses from the sale of gas before sharing profit with the government. Disallowing costs will result in government’s profit share rising.
The output has continued to drop in the subsequent years and is now below 4 mmscmd. Emails sent to RIL and BP remained unanswered. The two companies have challenged the cost disallowance of the past years and have initiated an international arbitration seeking dropping of the same on grounds that the PSC does not provide for any such punishment.