KG-D6: Govt rejects $1.2 bn cost recovery by RIL

Oil Ministry has served a notice on Reliance Industries disallowing $1.2 billion of cost recovery from eastern offshore KG-D6 fields for failing to meet drilling commitment.

The ministry on Wednesday sent a notice to RIL disallowing USD 457 million of cost recovery for 2010-11 and $778 million of cost recovery in 2011-12, sources privy to the development said.

RIL has already slapped an arbitration notice on the ministry saying the Production Sharing Contract (PSC) allows for operators to recover 100 per cent of the capital and operating expenditure on an oil and gas field and it does not in anyway link the cost recovery to production.

The ministry has refused to join arbitration saying there is no dispute till now but its notice of May 2 establishes there is a dispute over how much of cost can be recovered.