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Thursday, 05 January 2012 00:00
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After two years, RIL's new KG-D6 plan gets cleared

The year appears to have got off to a good start. After the good core sector numbers that 2011 ended with, 2012 began with a sharp jump in manufacturing PMI, and a day later, the composite PMI that includes services also saw a similar movement. While the RBI Governor added to the cheer by indicating rates cuts were in the offing, a lot more heartening is the clearance given to RIL’s $1.5 billion investment plan for four satellite fields in the KG-D6 block. The fields, in themselves, are not very big, but they offer the potential to raise output by 10 mmscmd of gas, a welcome hike given that RIL’s output is down to 35 mmscmd from the projected 80—this has meant a big shortfall in supplies to critical areas such as power and fertiliser. What’s more significant is that RIL’s application has been pending since 2009 and, even this time around, it almost never got cleared. The Directorate General of Hydrocarbons questioned the viability of the new investment based on the current gas prices and it took a last minute intervention from the petroleum secretary, no doubt prompted by the various missives from the UK because of BP’s involvement in the project, to get the project through.

Given the past experience with costs spiralling and production falling, the clearance has been given subject to a maximum cost increase of 15%. Which means the government has taken the mature view that there is nothing to be gained by delaying gas production because of the current dispute over capex spending of the past—that is best dealt with by arbitration as well as the findings of the in-depth audit that the CAG recommended the petroleum ministry do of 10 specific contracts to see if relevant financial prudence had been applied.



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