Reliance, BP promises to pay buyers in case of decline in production from KG-D6

Reliance Industries Limited (RIL) and its UK partner BP PLC have pledged to pay cash for the next round of production as they are unable to supply natural gas to customers in the prescribed amount from KG-D6 on the East Coast. As per the draft Gas Sale and Purchase Agreement (GSPA), Reliance and BP have shared the share price to increase the amount of gas produced from R-packages of KG-D6.

It clearly states that if they do not supply the buyer with a certain amount of natural gas from this second phase of production, the sellers will pay a price equal to the price of gas obtained from alternative sources. Buyers on the other hand have to take as much gas as they have promised to take. Failure to do so will pay for unused gas. According to the GSPA, even if the prescribed amount of gas is not taken, it can be taken in the next quarter.

Provisions will not apply in situations like earthquakes, floods, fires, epidemics, wars

However, the provision to make the receipt and distribution of gas compulsory in emergencies such as earthquakes, floods, fires, epidemics, wars, strikes, lockouts, government / regulatory measures and delays in court orders will not be effective. In addition, restrictions on losses, failures, stagnation, production or supply in gas fields will also fall under the emergency department. Reliance signed a decade ago to sell 60 million cubic meters of gas per day for gas produced from the KG-D6 gas field, but production has declined sharply due to well-related problems. This adversely affects the user from the power station.

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The company did not pay buyers for it and said it was out of its control. However, the government has imposed fines for failing to produce the prescribed amount. The agency challenged the move in an arbitration tribunal. The decision in the case is still pending. Reliance BP started production from the R-Sankul field last month. Reliance-BP auctioned an initial 5 million cubic meters of gas per day from the KG-D6 R-Series field in November 2016. Brent crude oil was made its basis. Now both have invited bids to increase gas production to 755 lakh units. This gas is available from February. Reliance and BP have demanded equal rates for the price of imported natural gas from Japan / Korea in the new bid.


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