Reliance Industries Ltd. and partners have issued a notice of arbitration seeking action by the government of India on the price of natural gas produced from the deepwater KG-D6 block in the Bay of Bengal (OGJ Online, Feb. 19, 2013).
Under a formula set by the government in 2013 that was to have provided a transition to arms-length pricing provided by the production-sharing contract, the group has been selling gas at a price of $4.20/MMbtu. The price was to have doubled on Apr. 1 (OGJ Online, July 1, 2013).
Delay of the price increase has created uncertainty and doubt about the ability of the group to sanction investments of nearly $4 billion this year, according to statements by RIL and Niko Resources Ltd., one of the partners with a 10% working interest.
“In addition, this will also delay the ability of the parties to appraise and develop other significant discoveries made last year,” the Niko statement said. “Overall, the parties were planning to invest $8-10 billion in the next few years to significantly increase production from the D6 block.”
RIL became subject to government pressure to accelerate drilling on the block when production failed to meet expectations.
BP PLC, the other partner, acquired its KG D6 stake in a 2011 purchase of 30% interests in 21 Indian blocks from RIL.
