Did regulatory red tape choke KG-D6 output? DGH being itself the party challenging the claim made by Reliance cannot be the mediator to resolve the dispute!
In 2010 the output of KG-D6 and MA fields of Reliance was around 61 mmscmd, which began to fall, instead of reaching the original target of 80 mmscmd. The contractors claimed, after carrying out various technical studies and investigation, that the fall in gas supply was due to a "geographical surprise". After serious discussions against the claim made by the contractor,, Reliance and the Director General of Hydrocarbons (DGH) made a counterclaim that the fall in production should be actually attributed to the contractor not drilling more wells in the area to obtain the gas.
After a series of endless exchanges, Reliance, it may be recalled, suggested that an international technically qualified expert in this matter be called to investigate the the root cause of the problem. In the meanwhile, there were floating charges that the contractor was "hoarding" gas because of the imminent revision of contract when a new price structure will be installed from April 2014 onwards.
The current output of KG-D6 and MA fields has increased to 13 mmscmd, from 10/11 mmscmd, a few months ago. Reliance contended that drilling extra wells in the same area would not have simply increased output.
In a recent interview to the press, Sashi Mukundan, regional president and country head of BP Group stated that had it not been for the delays in getting approvals the output would have doubled to 20 mmscmd! He reiterated that red tape simply choked up the output from KG-D6 wells! He also rebuffed the charge that the fall in production had nothing to do with the anticipated price change or its official notification later. He reconfirmed that KG-D6 has still great potential to be one of India's top gas fields.
Take for instance the major oil discovery in 2013 (around May) in D-55 or MJ1 in the block, appraiser wells are being drilled. Work is in progress and it would take some more time before the potential and viability can be established.
In the next few years, the RIL-BP group hopes to invest around $10 billion in exploration and development in the east coast, provided timely regulatory approvals are received. If work goes smoothly, uninterrupted by delays and red tape, contractors feel that there is potential for quadrupling our production by the end of this decade. They have plans to participate in the next round of new exploration licensing policy i.e. NELP X, when the details are made public.
In regard to the present dispute with the contractor, for which Reliance has been made to provide a bank guarantee, media reports indicate that the regulator may turn to be the mediator in the KG-D6 row. Organisations like ONGC think that the Director General of Hydrocarbons should play an assertive role in settling disputes. At the end of the day, such matters should not be allowed to drag on for months on end; but, DGH being itself the party challenging the claim made by Reliance, cannot be the mediator to resolve the dispute! How can the judge and jury be the same person?
It is high time that Veerappa Moily takes the leadership role in having all the parties to the dispute, supported by their technical teams, to sit and resolve the issues. If need be, they can choose a third party technical expert to make an assessment of the actual situation at site and give the recommendations, so that Moily can take the final decision on the matter.
At the same time, he should ensure that all pending matters relating to the oil and coal industry which are "pending" for any clearance should be expeditiously handled within a time frame, so that at least we can start the next fiscal year with a clean slate!
(AK Ramdas has worked with the Engineering Export Promotion Council of the ministry of commerce. He was also associated with various committees of the Council. His international career took him to places like Beirut, Kuwait and Dubai at a time when these were small trading outposts; and later to the US.)
Vikram Malik (name changed) is a safe investor who made investment in tax-free bonds last...
For the upmove to remain intact the Nifty should manage to keep itself above 6,320
The market struggled to stay in the green zone for the entire morning session. However, in the noon session the indices remained mostly in the positive till the end of the trading session. On Wednesday, we had mentioned that the Sensex, Nifty are on a slow uptrend and the Nifty has to close strongly below 6,310 so that the uptrend may pause. Today, for the entire session the index managed to keep itself above this level.
The Sensex and the Nifty opened at 21,320 and 6,326. The Sensex moved up to the level of 21,265 from the level of 21,410 and closed at 21,374 (up 36 points or 0.17%). The Nifty moved in the range of 6,316 and 6,356 and closed at 6,346 (up 7 points or 0.11%). The NSE recorded a volume of 50.95 crore shares. For the second consecutive session Sensex closed at it all time high.
Among the other indices on the NSE, the top five gainers were Infra (1%); Finance (0.37%); Pharma (0.33%); FMCG (0.23%) and Service (0.14%) while the top five losers were Auto (1.03%); Smallcap (0.73%); Energy (0.54%); Dividend Opportunities (0.53%) and Commodities (0.48%).
Of the 50 stocks on the Nifty, 25 ended in the green. The top five gainers were LT (2.66%); Jindal Steel (2.48%); Axis Bank (2.19%); Sun Pharma (2.10%) and Gail (2.07%). The top five losers were M&M (2.89%); HCL Technologies (1.96%); ONGC (1.69%); PNB (1.25%) and Coal India (1.22%).
Of the 1,518 companies on the NSE, 605 companies closed in the green, 815 companies closed in the red and 98 closed flat.
Larsen & Toubro after market hours on Wednesday gave out its December 2013 quarter result. The margins beat estimates and presence in the diverse sectors, healthy order book, proven track record and strong balance sheet were the key enablers for the company to steer through the near to medium challenges and meet its growth aspirations. The stock came out as the top performer today in both Sensex 30 stocks and Nifty 50 stocks.
Congress party chief Sonia Gandhi has written to the government, to ask for a cut in the record import duty on gold and for other restrictions to be eased, a television channel said citing sources that it did not identify.
Planning Commission Deputy Chairman Montek Singh Ahluwalia today said the next government will have to take forward the process of fiscal consolidation to keep the economic momentum intact. He also said that India has the potential to grow over 6% and even 7.5% in the long term.
US indices closed flat yesterday.
Except for Jakarta Composite (up 0.41%) all the other Asian indices closed in the red. Hang Seng was the top loser which fell 1.51%.
A Chinese manufacturing index showed a slowdown in January as output and orders cooled. The preliminary reading of 49.6 for a Purchasing Managers' Index released today by HSBC Holdings Plc and Markit Economics, a six-month low, compares with a final figure of 50.5 in December.
South Korea's economic growth slowed in the final quarter of last year on weaker construction spending. Gross domestic product rose a seasonally adjusted 0.9% in the October-December period from the previous quarter, when the economy expanded 1.1%, the Bank of Korea said today.
European indices were trading in the negative. The US Futures too were trading lower.
Markit Economics said today that the manufacturing output for the euro area rose to 53.9 in January, the highest since May 2011. Its measure of services rose to 51.9 from 51 the previous month.