The Telegraph
Thursday , March 6 , 2014
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Reliance partners lend support

New Delhi, March 5: Niko Resources and global major BP — the two partners of Reliance Industries in the KG-D6 blocks — have said they will shoulder the bank guarantee for getting the new gas price from April 1 and are party to the arbitration proceeding initiated by the block operator on production lagging targets.

The oil ministry has been cautious after the filing of the FIR by the anti-corruption branch of the Delhi government and has sought the view of the law ministry on extending the new gas price to Niko and BP as they had not specifically sought the new price.

Officials said to avail themselves of the higher price, the two companies would need to furnish bank guarantees and be part of the arbitration process initiated by RIL against the government.

Sources said BP and Niko had written separate letters saying that RIL, in filing the notice of arbitration, had acted as an operator representing the interest of all the KG-D6 constituents.

All partners are operating jointly on terms specified by Clause 7.3 of the production sharing contract (PSC) and Clause 4.5 of the joint operating agreement for the KG-D6 block, they wrote.

According to sources, BP and Niko said as a contractor to the PSC, they were party to the arbitration and RIL had represented them.

The two partners have also informed the ministry that they will shoulder the responsibility of a bank guarantee along with RIL to benefit from the higher gas price.

In separate letters to the ministry, the two companies said as joint venture partners in the block, they were equally responsible in meeting any obligation.

Sources said the technicalities of submission of a bank guarantee had been used by the oil ministry in not announcing the new price that will be applicable from April 1.

“The contractor will be allowed to sell D1 and D3 (fields) gas at revised prices from April 1. The sale will be permitted on the basis of a bank guarantee by RIL in favour of the government,” petroleum minister M. Veerappa Moily has told mediapersons while announcing the CCEA decision.

The bank guarantee of $9 billion will cover the difference between the current gas price of $4.2 per million British thermal units (mBtu) and $8.4 per mBtu, the price which is expected to come into effect from April.

It will be encashed if it is proved that the company hoarded gas or deliberately suppressed production at the main Dhirubhai-1 and 3 (D1 and D3) fields in the eastern offshore KG-D6 block.