In 2007, Gyanesh Pandey set up Husk Power Systems (HPS) in his native state of Bihar after he quit a well-paying job in in the US. He roped in three friends — Ratnesh Yadav, Charles Ransler and Manoj Sinha — who shared his vision to bring reliable and affordable power to India's hinterland, especially Bihar.It took five years of research to identify the technology, one that would make use of non-conventional fuel — rice husk — and suit the economics of rural electrification. That done, in 2008, a remote village in West Champaran district of Bihar called Tamkuha was lit up for the first time, 60 years after Independence.HPS had the ingredients for success in place. Rice husk was available at Rs 60 per quintal (100 kg); it took an average of three quintals of rice husk a day to generate 32 kilowatts of power, enough for 500 households. The running cost of a plant came to about Rs 20,000 a month. Power was supplied at Rs 80 a month; it could power two CFL bulbs (15 watt each) and a mobile charging point. HPS supplied 7-8 hours of power to these villages after sundown.Dream StartIn three years, HPS built 24 plants and electrified 80 villages (about 12,000 households). And it brought many smiles. Says Ramashish Ram, a panchayat member in Tamkuha village, "We are very happy that electricity has come to our village which was totally disconnected from the rest of the state." In 2009, HPS won the 2009 DFJ and Cisco Global Business Plan Competition; in 2010, it was honoured by The Tech Museum of Innovation for applying technology to benefit humanity. In 2011, it won the International Ashden Award for Sustainable Energy and Africa Enterprise Challenge Fund (AECF) Award for its operations in Tanzania. Pandey also bagged the 2011 Real Heroes Award. And HPS ranked second in the BW Young Entrepreneurs Awards held in March 2010.With awards came subsidies from the Centre and direct investments. On the HPS investors' list figured Acumen Fund, Shell Foundation, Draper Fisher Jurvetson (DFJ), Ministry of New and Renewable Energy, International Finance Corporation, LGT Venture Philanthropy, Bamboo Finance and CISCO. By 2010, it had raised more than Rs 5 crore in funding. Buoyed by investors' enthusiasm, HPS saw reason to spread its wings.In 2010, the number of unelectrified villages in India stood at 125,000. It was estimated that there was enough husk to power 200,000 villages. Shell Foundation, which supported Husk Power with donor capital, came on board in 2008 as a strategic partner. HPS began building a plant every month (earlier, it was one plant every three months). By early 2009, it had scaled-up its capability to building a plant every two and a half weeks. HPS's focus on R&D helped it cut power plant equipment costs by 25 per cent. "We are highly impressed with the speed at which Husk Power has innovated in its field and we believe its biggest achievements are ahead of it. The team continues to drive down costs to the lowest level at its scale, and improve the efficiency of its model to empower its customers," says Simon Desjardins, programme manager, Access to Energy, Shell Foundation.3000: The number of plants HPS expects to build by 2017; it has built 90 plants in four yearsbreak-page-breakHPS also earned money through char monetisation — it trained rural women to make incense sticks, which were sold to big brands — and door-to-door sales of electrical appliances and FMCG products to villagers. HPS has just begun providing LED lamps powered by solar energy for Rs 150 a unit to far off hamlets of 20-50 households. The company has planned to sell carbon credits generated by operating a clean technology. In fact, it has already sold forward credits to Shell Foundation and expects to earn $1,000 per plant per year.While cheers have come HPS's way, there is a big gap between the dream and the reality.Hiccups On The WayHPS started with a minimum monthly charge of Rs 80; it is now Rs 125. This is attributed to an increase in the cost of rice husk and higher salaries. But the cost of rice husk has gone up by only Rs 0.5 in the past three years to Rs 1.50 per kg. Also, villagers talk of disruptive and low voltage at times, though they acknowledge that the company adjusts the monthly charge in such cases. HPS had set out an ambitious plan to develop and install 10,000 mini-power plants by 2014 (BW's issue dated 18 March 2010 had mentioned this number, but Pandey now claims that "it was 10,000 villages through 2,014 plants by 2014"). It would have meant power to more than 50 lakh households by 2014. Two years down the line, HPS has now brought down its target to 3,000 plants by 2017 (582 plants per year). It has built 90 plants in almost four years. "The Franchise Model Was Devised To Be Our Engine Of Growth, But It Could Not Take Off"Puneet Rustagi, Director of business planning and strategy, HPS Bihar has 1,89,40,629 households (rural: 1,69,26,958 and urban: 20,13,671), but only 30,98,435 have electricity. Plus, you have 2,058 villages with access to energy, but no electricity in the grid. This represents a great opportunity for HPS. But to HPS's disadvantage, the average cost of power supplied by Bihar State Electricity Board (BSEB) to villages stands at Rs 5.50 per unit. It is Rs 9 per unit for power from HPS's plants. Thus, grid power would be HPS's biggest challenge once it reaches these villages which, going by its slow progress, seems a distant dream.In addition to spending more than half a million dollars on research and development and on technology aggregation (retrofitting plants with the advanced systems), HPS had to invest a lot to train unskilled folk to run the plants. It also decided to set up a vocational training institute: Husk Power University.The Status QuoHPS has added some 66 plants in the past two years. It has trained and employed nearly 400 unskilled locals and, the Husk Power University is a "work-in-progress". Says Pandey, "We were supposed to get funds for the next round of expansion by the third quarter of last year, but it has been delayed. I would rather reserve my comments on the reasons for the delay. We just were not seasoned enough to know the game as it is played. The government's subsidy has not been disbursed in time as well."The BSEB is sceptical of the entire enterprise. "The scope for expansion is a bit limited (for husk power). I do not see much hope," says a senior BSEB official.Investors, however, are upbeat: "The past year has been one of consolidation for the company, developing systems and new technologies including an in-house training facility for plant operators. Husk's management has a solid strategy. And with the support of investors, it will be exciting to see them provide electricity to 300 villages, serving more than 500,000 people by 2014," says Karthik Chandrasekar, energy portfolio manager, Acumen Fund. These plants will come up in Bihar, eastern Uttar Pradesh, Jharkhand, Orissa and Chhattisgarh as well as Nepal and Africa. "Outside of India, our major thrust would be in Africa where we plan to have close to 25 plants by the year-end," says Puneet Rustagi, director of business planning and strategy at HPS.HPS intends to build up to 200 plants of its own, while 2,800 more would be franchises. "When we started, the model was build, own and operate. We realised that if we wanted to achieve our vision of installing 2,000-3,000 plants, we had to devise a different model," explains Rustagi.The franchise model was welcomed by local entrepreneurs and NGOs but "financing for local entrepreneurs," admits Pandey, "has been a big challenge. "The franchise model was devised to be our engine of growth, but it couldn't really take off," says Rustagi. HPS is working towards raising $5 million in investments. The funds would be largely invested in unlocking financing for local entrepreneurs, in char monetisation and in the Husk Power University. "HPS and my personal focus has not been just numbers, but developing a self-sustainable ecosystem. Investors have a different view. The social investment space is full of mad, dirty games. If I have to engage in another round of funding, I will change the plan," says a disgruntled Pandey.He confesses to a timeline of 4-5 years before he quits as CEO to assume a less active role in HPS. What about the vacuum in his absence? Pandey turns philosophical. "Every leader has a lifespan and every organisation needs a change at the top. Even Muhammad Yunus left Grameen Bank (in Bangladesh) so that a new management could take over."chhavi(dot)tyagi(at)abp(dot)in(This story was published in Businessworld Issue Dated 14-05-2012)
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Reliance Industries and partners BP and Canada's Niko Resources have abandoned the D4 oil and gas block off India's east coast, Niko said, underlining the production problems in the region.The D4 block, situated in the Mahanadi basin, lies north of Reliance's main D6 block in the neighbouring Krishna-Godavari basin, where gas output has declined sharply over the last year, marring growth outlook for the Indian energy major and forcing the government to hold back approvals.Niko said in a statement its decision and that of its partners stemmed from the current geological assessment related to the size of the trapping mechanism and the commercial environment currently prevailing in India.Niko was required to conduct seismic work and drill three exploration wells until June 2013 on the block, which is spread over 17,000 square kilometers, according to information on its website.Calgary, Alberta-based Niko has a 15 per cent interest in the D4 block, while BP holds 30 per cent. Reliance owns the rest and is also the operator of the block.According to reports, in 2010, Niko initially estimated the D4 block could potentially be twice as large as the flagship D6 block in the Krishna-Godavari basin and may hold as much as 100 trillion cubic feet (tcf) of gas.However, analysts currently estimate the D4 block's reserves at a small fraction of that number."It is not that significant a block. But it just reiterates that the exploration and production block that Reliance holds is not that promising. The entire block is being relinquished," Ambit Cap analyst Dayanand Mittal said.A Reliance spokesman did not immediately comment. Officials at BP declined to comment on the matter.Earlier this month, Reliance cut estimates for proven gas reserves in its Indian blocks by 7 per cent to 3.67 trillion cubic feet (tcf), blaming low pressure and uneconomic volumes for the lower-than-expected volumes.Niko holds a 10 per cent stake in the D6 block, which is estimated to hold probable reseves of more than 9 tcf of gas. Last year, Reliance sold a 30 per cent stake in 21 oil and gas blocks - including in KGD6 and D4, to BP, in a $7.2 billion deal.Reliance shares closed 0.6 per cent lower at 691.10 rupees, in a Mumbai market down 1 per cent. Niko shares were down more than 16 per cent to C$27.81 on the Toronto Stock Exchange.(Reuters)
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Turkmenistan agreed on Wednesday to supply natural gas to Pakistan and India in deals that offer major economic benefits but depend on building and defending a US-backed pipeline across chronically unstable Afghanistan.The route, particularly the 735-km (450-mile) leg through the Afghan provinces of Herat and Kandahar, will need billions of dollars in funding. It faces significant security problems as the Western NATO alliance plans to hand control of Afghanistan to Kabul's own security forces by the middle of next year.Turkmenistan's state gas company Turkmengaz signed gas sales and purchase agreements with Pakistan's Inter State Gas Systems and Indian state-run utility GAIL."The implementation of this project will give a powerful impetus to the social and economic development of all the participant countries," Turkmen Deputy Prime Minister Baimurad Hojamukhamedov said before the signing ceremony in Avaza on the Caspian Sea.India and Pakistan are both hungry for gas supplies and Turkmenistan, formerly part of the Soviet Union, is keen to free itself from reliance on gas exports to Russia.Lilit Gevorgyan, analyst at IHS Global Insight, said that while the pipeline could be a lucrative commercial project, it would run through more than one high security risk country, "which puts the actual construction under a big question mark".The idea of the TAPI pipeline, an acronym formed from the initials of the four countries through which it would pass, was first raised in the mid-1990s but construction has yet to begin.Turkmen officials have said the proposed 1,735-km (1,085-mile) pipeline could carry 1 trillion cubic metres of gas over a 30-year period, or 33 billion cubic metres a year.Turkmenistan, a desert country of 5.5 million which borders Iran, is viewed by human rights bodies as one of the world's most secretive and repressive countries.But Turkmen President Kurbanguly Berdymukhamedov, who has a growing personality cult, has moved in recent years to warm ties with the West, whose political support and investment he needs to lay alternative gas export routes.Security & CostsThe major obstacle to the project is the stretch of pipeline that will run through Afghanistan. NATO set an "irreversible" course out of Afghanistan on Monday but U.S. President Barack Obama admitted its plan to end the deeply unpopular war in 2014 was fraught with dangers.A NATO summit in Chicago endorsed an exit strategy that calls for handing control of Afghanistan to its security forces next year but left questions unanswered about how to prevent a slide into chaos and a resurgence of the Taliban after allied troops are gone."Ultimately we believe that all the challenges, including security challenges that the project faces, can be managed or overcome," Daniel Stein, senior adviser to the U.S. State Department's special envoy for Eurasian energy, told Reuters in Avaza on Wednesday. He did not elaborate.But IHS Global Insight's Gevorgyan wrote in comments to Reuters that "the project had a slim fighting chance in the past decade as NATO was still in Afghanistan"."With the Western troops' pullout by 2014 from the still volatile Afghanistan, building an expensive pipeline in country with very weak central government seems almost unattainable."The Asian Development Bank said the TAPI pipeline was estimated to cost at least $7.6 billion in 2008. Analysts and officials now say it could cost between $10 billion and $12 billion to construct.Strained ties between nuclear powers India and Pakistan, which have fought several wars and been involved in border conflicts and military standoffs since the 1947 partition of British India, is another source of concern."Given the animosity between the two countries, if TAPI is ever to be built it is likely to be a high-value target in Pakistan, where a number of religious fundamentalist groups will ensure that no energy supply enters India through their territory," Gevorgyan wrote.In Avaza, Pakistani Petroleum and Natural Resources Minister Asim Hussain showed optimism. "We will forget our past," he said. "Let bygone be bygone and let's move into the future."Turkmenistan is promoting TAPI as a key element in plans to boost annual gas exports to 180 billion cubic metres by 2030.BP data show Turkmenistan's natural gas reserves equal to those of Saudi Arabia and behind only Russia, Iran and Qatar.The country aims to supply gas from its Galkynysh field, better known by its previous name, South Iolotan. Auditor Gaffney, Cline & Associates has ranked the field the world's second largest, with gas reserves of between 13.1 trillion and 21.2 trillion cubic metres.The Indian government said in a statement on May 17 that the pipeline would be operational in 2018. India and Pakistan would each get 38 million cubic metres per day (mcmd) of gas, while the remaining 14 mcmd would be supplied to Afghanistan, it said.Separately, an Indian Oil Ministry official said last week that the transit fee for the gas had been fixed at about 50 cents per million British thermal units (mmBtu).India, Asia's third-largest oil consumer, imports about 80 percent of its oil needs while falling local gas output has forced it to buy costly liquefied natural gas.(Reuters)
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CLSA upgrades Power Grid Corporation of India to "buy" from "outperform", while maintaining its target price at 125 rupees, citing stronger-than-expected orders.CLSA raises its capex estimates for the next three years, though says it could lead to equity dilution of 10 per cent in fiscal 2014 if the company maintains 70:30 debt equity funding, higher than its previous estimate of 5 per cent.Shares in Power Grid fall 0.6 per cent to 103.10 rupees, slightly outperforming 0.74 per cent fall in Nifty index. (Reuters)
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Andrew McNeal, an expat working in Bangalore, travels 20 km every day to his office in Electronic City from his residence on M.G. Road. Often, to avoid evening rush hour traffic, he parks his car on Level 4 of the Forum Mall and visits a coffee shop. "I get to catch up on my reading, but more importantly, my car gets washed at the parking lot," says McNeal who pays Rs 500 per wash. With malls trying hard to woo customers, parking services such as these are becoming an important element in retail operations as better parking facilities translate into higher footfalls.Little wonder parking is now serious business and involves a lot more than just a scruffy lad handing over a ticket as one leaves the parking lot. On offer is a range of services from manning of the parking bays to valet parking and even data analysis on the number of people visiting a property and the number of hours spent there. "Parking has to be the least of the worries for someone on his way to work or when he goes out with his family," says N. Sathyanarayanan, CEO and founder of Central Parking Services, a Rs 55-crore turnover company that manages 30,000 parking bays in 90 malls and five airports across 27 cities in India.The size of the parking market in India is estimated to be around $300 million and growing at 30 per cent each year. Of this 90 per cent is unorganised and in the hands of local contractors, leaving the organised parking market at only around Rs 150 crore. However, this presents a significant opportunity for a player with the right systems and technology in place. Consider this: India has over 100 million registered vehicles. Last year alone, 2.4 million cars were added to Indian roads and auto companies estimate sales to increase to 6 million units a year by 2018. "There exists a significant need for parking management in India given the explosive growth in car ownership, resulting in traffic congestion, limited availability of urban land and consequently scarcity of parking," says Raghuveer Mendu, general partner at venture capital firm VentureEast, which invested $5.5 million in Central Parking Services in 2010. "The business is disorganised and is handled by small operators; it has the potential to be a large business," says Mendu. "We are in talks with various city municipalities to build parking lots in congested areas"N. Sathyanarayanan, CEO and founder, Central Parking Services(BW Pic By Jagadeesh N.V.) And it is this potential that drew Australian firm Secure Parking into setting up shop in India in 2008. "With more cars and two-wheelers, the need for organised parking will only be much greater," says Arvind Mayar, managing director of Secure Parking India. "Parking is not a commodity and the service element is what we want to bring to India." The company handles over 10,000 bays spread across 105 car parks in Delhi, Bangalore and Mumbai.Giving it competition is Malaysian company Tenaga Parking that came to India a year before Secure Parking and operates over 20,000 bays in shopping malls, airports and hotels, mostly in Delhi/NCR. The company, which has a turnover of Rs 10 crore, also handles the parking at the Hyderabad international airport.A spokesperson from DLF Promenade, a mall in Delhi which uses the services of Tenaga, says that the company's professional handling of parking allows the mall management to not get entangled in the peripheral-yet-important issue of parking facilities, and instead focus on the shoppers. Choice Of ModelsDifferent business models are fast evolving in the parking market. Under the first and most prevalent model, contracted staff handle basic collection of parking tickets. There is no revenue share and they are paid a fixed fee. The second model is an extension of the first with revenue sharing, joint ventures, parking technology, data analytics, security barriers and electronic tickets coming in. The parking company either gets a percentage of collections or is contracted to maintain a parking lot for a minimum of four years. Malls depend on their expertise, their ability to secure and provide trained staff, equipment and systems.Under the third business model, parking firms provide design and consultancy services to builders before a project is launched. Central Parking, Secure Parking and Tenaga use all three models, but earn maximum revenues under the first model. According to retail experts, there are specialists in all facets of mall management and parking management is one such area of specialisation. "Good parking increases footfalls in airports and malls," says Sathyanarayanan. He says that builders have finally woken up to the fact that parking is more of a science than labour arbitrage. There is a return on investment involved in parking and it determines the success of a property.break-page-breakIn fact, one of the big reasons behind why many malls in India have failed miserably is because there was no proper handling of parking. "Parking is an integral component of any well- managed mall. It should not be seen as a mere ‘plug-in'. It is an element of construction required for planning approval," says Jonathan Yach, CEO of Mantri Square Mall in Bangalore. A mall with a well-designed parking garage benefits both customers and tenants.Most malls in India have revenue share agreements with parking companies where the parking company pays 7-10 per cent of all the collections to the shopping centre. However, some malls invest in the technology of parking and bring in a parking firm on a management contract. "Parking forms a very small portion of the overall revenues of the mall, so it makes sense to outsource the business," says Pinaki Ranjan Mishra, national leader, consumer markets, at Ernst & Young. But Mantri mall's Yach disagrees: "Parking revenues are an important source of income for any mall owner and manager. The trick though is to ensure that as much parking is provided as possible." BOOT (build, operate, own and transfer) is emerging as a model across suburbs and airports in India. "We are in talks with various city municipalities to build parking lots in congested areas," says Sathyanarayanan. Within the next 48 months, at least 12 multi-level car parks are expected to come up in Bangalore alone. In Hyderabad, Apollo Health City is building a multi-level car park to accommodate 500 cars. "With more cars and twowheelers, the need for organised parking will only be greater"Arvind Mayar, managing director, Secure Parking India(BW Pic By Umesh Goswami) Currently, all parking companies are in talks with IDFC and IL&FS to become financial partners in building multi-level car parks. Here the financial partner will hold a 90 per cent stake in the project and 10 per cent will be owned by the parking company. An EPC (engineering and procurement company) will be brought in to complete the project. "The aim of public parking should be to decongest cities and not to create a retail play in the property, as it congests the city and does not serve its purpose," says Sathyanarayanan.The Business Of Parking Setting up a parking lot for around a 1,000 cars costs nearly Rs 1 crore, of which Rs 70 lakh goes towards the technology (sensors, cameras and security systems, parking software, etc.) while the rest is used to put up signage, speed breakers and ground-level offices, etc. Besides the fixed costs, the major operating expenses for these companies include staff salaries, training and maintenance.On an average, 45 people are employed in the parking space of a 1.2 million sq. ft mall. But some malls rely more on technology and less on people. For instance, the Number One MG Road mall in Bangalore has completely auto-pay stations, and employs fewer than 20 people in the parking lot.On the revenue side, on average, a mall charges Rs 20 per hour, which goes up to Rs 50 on weekends. So if a mall has 1,000 bays and 800 of them are occupied for eight hours every day, the parking company will earn a revenue of Rs 128,000 daily. On an average a parking company nets 9-10 per cent profit after tax. "If the mall or airport is successful, we make our money," says Mayar of Secure Parking.While malls may be more prevalent, airports is where the big business is since the value of the collection there is much higher. The average parking cost at most metro airports is in the range of Rs 60-100 per hour, while it is Rs 30-75 at high-end malls (full-day parking charges are in the Rs 300-1,000 range at airports). So, it is not surprising that at least 50 per cent of the business for the parking firms comes from airports, about 45 per cent from malls and shopping centres, and the rest from institutions.India's booming economy has over the years greatly increased the need for parking with the number of retail malls, airports, hospitals and density in large apartment buildings increasing vastly. While there is still a lot to achieve in this business, making it more organised is a step in the right direction. vishal(dot)krishna(at)abp(dot)in(This story was published in Businessworld Issue Dated 14-05-2012)
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With rupee depreciation leading to jump in oil import bill, Petroleum Minister S Jaipal Reddy today said there is an immediate need to raise fuel prices, but refused to say when the hike will actually take place."It (price increase) is very essential but (before hiking rates) we have to talk to political parties," he told reporters here on way to Ashgabat for signing of the agreement for the Turkmenistan-Afghanistan-Pakistan-India pipeline.The government had decontrolled petrol price in June 2010 but rates were last increased on November 4 last year. This despite oil price rising by 14 per cent and 7 per cent fall in value of rupee against the US dollar.Price of diesel, kerosene and cooking gas were raised in June last year."If rupee depreciates by one against the US dollar, our oil companies lose Rs 8,000 crore (annually)," Reddy said."Rupee yesterday dipped (to an all-time low of) Rs 55 (to a US dollar). Last year it was Rs 46. This translates into a loss of Rs 72,000 crore (on account of rupee depreciation) this year.""Seeing all this, something needs to be done, but when will it be done, how it will be done... I cannot make a forecast," Reddy said. "There is no decision on raising price or not raising prices".State-owned oil firms, who had in the fiscal ending March 31, 2012 lost Rs 4,860 crore on petrol sales, are currently losing Rs 6.28 per litre on petrol. After including 20 per cent VAT, the desired increase in petrol price in Delhi comes to Rs 7.53 a litre. .(PTI)
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Canadian oil and gas producer Niko Resources Ltd said it will relinquish its interest in the D4 block at the Mahanadi basin, off India's east coast.The company said this decision was the result of the current geological assessment related to the size and risk of the trapping mechanism as well as the current commercial environment in India.Niko has a 15 per cent interest in the D4 Block. Spread over 17,000 square kilometres, the block is in the exploration phase.(Reuters)
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The oil ministry has hiked the penalty it wants to impose on Reliance Industries Ltd (RIL) and its British partner BP plc for falling natural gas output from KG-D6 fields, by 18 per cent to $1.46 billion.The ministry had previously wanted to disallow $1.235 billion expenditure that RIL had incurred on putting production facilities at the Bay of Bengal gas fields but in the 7-page notice it sent to the company on 2 May, the cost to be disallowed was put at $1.462 billion, sources privy to the development said.The drop in reservoir pressure coupled with increased water and sand ingress has seen output from Dhirubhai-1 and 3 gas fields in the deepsea KG-DWN-98/3 or KG-D6 block fall from 53-54 million standard cubic meters per day achieved in March 2010 to 27.5 mmscmd last month, instead of rising to projected 80 mmscmd for current year.The ministry feels the drop in pressure had resulted in under-utilization or creation of excess capacity and wants to disallow cost recovery in proportion to that.The production sharing contract (PSC) allows an operator to deduct all capital and operating expenses from the revenue it earns from sale of hydrocarbons -- called cost recovery -- before sharing profits with the government.The notice signed by A. Giridhar, joint secretary (exploration) in the ministry of petroleum and natural gas, says $457 million expenditure in 2010-11 and another $1.005 billion in 2011-12 will be disallowed for cost recovery on account of excess capacity and under-utilization of facilities.Sources said the ministry had previously wanted to disallow $457 million of cost recovery for 2010-11 and $778 million of cost recovery in 2011-12. The ministry and its technical arm, the Directorate General of Hydrocarbons (DGH) is to approve accounts for the two fiscal.Anticipating such a move, RIL has in November last year slapped an arbitration notice on the ministry saying the PSC allows operators to recover 100 per cent of the capital and operating expenditure and does not in anyway link the cost recovery to production.The ministry has thus far tried to brow-beat RIL into withdrawing the arbitration notice, saying that no dispute has arisen as yet but its notice of 2 May establishes there is a dispute over how much of cost can be recovered.With the ministry refusing to appoint arbitrator to resolve the issue, RIL had moved to the Supreme Court requesting for appointment of arbitrators on behalf of the government.Sources said the ministry letter stated that RIL has till now spent $5.693 billion on development of Dhirubhai-1 and 3 (D1& D3) gas fields in KG-DWN-98/3 (KG-D6), of which about $4.574 billion has been incurred on production facilities alone."It is brought to your notice that up to March 31, 2011, you have recovered a sum of approximately $5.258 billion from the petroleum operations in the D1 and D3 development area," the letter stated.D1&D3 are producing about 27.5 mmscmd as against 61.88 mmscmd committed by RIL in its $8.8 billion development plan for the fields for 2011-12 fiscal.The ministry blamed the fall in output from 53-54 mmscmd achieved in March 2010 to drilling of less than committed wells, they said.Sources said RIL as per the approved field development plans, should have put 22 wells on production for 61.88 mmscmd and 31 wells for 80 mmscmd this year.But the company has so far drilled 22 wells on the fields but has put on production only 18 wells. The other four have not been connected to production system as they contain uneconomical reserves.Of the 18 wells, six had to be shut because of high water and sand ingress and fall in pressure. RIL believed that the field has not behaved as predicted and so indiscriminate drilling would be a big drain on cost.But the ministry held RIL responsible for violation of its committed work programme in the PSC and slapped cost recovery disallowing notice, they added.Together with 6.37 mmscmd of output from MA oilfield in the same block, KG-D6 output is around 34 mmscmd currently.(PTI)
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