Oil & Gas

RIL may be keen to resolve the cost recovery issue in its KG-D6 block through arbitration, but the actual proceedings may begin only after a month or longer. The petroleum ministry is in no hurry to reply to the arbitration notice sent by RIL earlier this week. It will discuss the issue with the law ministry whose opinion on cost recovery lies at the root of RIL action. Petroleum secretary G C Chaturvedi said the arbitration notice grants a time of up to a month to respond and there was no hurry. He said they were studying the notice and the law ministry’s opinion on restricting cost recovery.

At a time when the government is arguing that "under-recoveries" for oil companies is forcing upward revision in petrol prices, its own coffers have seen windfall gains from taxes on high prices. Indirect taxes on petroleum fetched the exchequer Rs1trn in 2010-11, a jump of 43% or over Rs300bn from the previous year. That's not all.

 The government’s earnings from dividends and royalty payouts as well as profit from private oil contractors, was a sizeable Rs200bn in FY11. Also, the rise in dividend payout of 13% in 2010-11 by the state-controlled oil companies over the previous year reveals a much better performance than most other corporate houses, particularly in a year when the industry has been going through global financial turmoil and slowdown.

The gov’t has refused to recognise six KG-D6 discoveries saying the claims were not backed by prescribed tests. The DGH’s decision is based on a clause in the PSC, which requires the operator to conduct tests to check the actual flow, while RIL opted for a modern technique using a "modular dynamic tester" which is faster and significantly cheaper.

 Officials said the DGH was taking a tough stand after CBI filed corruption cases against its former chief VK Sibal and six other officials for allegedly favouring a US-based company which conducted seismic surveys of domestic sedimentary basins. DGH officials say they are strictly adhering to the production sharing contract as they do not want to risk admonishment by the CAG, vigilance enquiries or CBI raids.

Union Minister of State for Petroleum and Natural Gas RPN Singh said, The Centre was not considering any hike in prices of kerosene, diesel, and LPG. "The Centre is not taking any decision to hike the present prices of diesel, cooking gas, and kerosene", he told reporters at the city airport, en route to Dewas. However, he said the gov’t has no way to regulate the price of petrol as it is directly connected with crude rates. "Hence, whenever there is any fluctuation in crude oil prices and value of dollar against rupee at the international level, oil companies have to effect the change of prices".