The government threatens to alter the production sharing contract (PSC) with Reliance to reverse cost recovery for the KG-D6 block is illegal and will adversely affect E&P investments, reports CNBC-TV18's Nayantara Rai quoting company sources.
On September 22, the Oil Ministry after getting an opinion from the Solicitor General was actually looking at reversing some of the cost recoveries that RIL had taken part at the KG-D6. The contention was that with the production of around 37 MMSCMD at KG-D6, Reliance should have only invested about USD 3.7 billion and not about USD 5.2 billion as it had and therefore was looking at a reversal of USD 1.8 billion.
According to sources, the oil secretary will take decision in three to four weeks and may could even send a notice to the company and if required even amend the PSC to include this punitive clause. However, RIL is fuming on this and said that any such move will not only be illegal, it is also against the sanctity of the PSC.
The company source also added that BP, its joint venture partner is also very upset with this development.
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