APAN SEN

"tEMBER OF PARLIAMENT (RAJYA SABHA)

[R : STANDING COMMITTEE ON PETROLEUM & NATURAL GAS

OFFICE'

13-A. ROUSE AVENUE NEW DELHI-11 0002 PHONE. 23221288. 23221306 FAX: 23221284

'8ER : CONSULTATIVE COMMITIEE MINISTRY OF STEEL MBER : COMMITIEE ON PUBLIC UNDERTAKINGS (COPU)

FOR

RESIDENCE: 501. V P HOUSE, RAFI MARG. NEW DELHI-110 001 Tel: 23766546 Mobile: 98681 81055 E-mail: tapan.sen@sansad.nic.in

16th January 2012 Dear Dr Manmohan Singh Ji, Kindly refer to my letter dated io" October 2011 requesting you to kindly get natural gas pricing methodology critically examined by CAG,which has led to upsurge in pric~ of indigenously produced gas without any linkage to its actual production cost. You"may recall, the price of natural gas was decided by the EGoM constituted for the purpose in the context of the "price discovered" by Mis Reliance and proposition made thereon" .

Unfortunately, I am not aware of any action being taken in that regard although the same had been an urgent necessity. Almost Simultaneously and disturbingly enough, it is learnt that demand for further raising the price of natural gas is being made by the major contractor in KGD6field. And such demand is also accompanied ostensibly with a calculated scaling down of production of natural gas from KGD6 field by the contractor in violation of the contract on a non-verifiable plea of 'geological complexity'. You are aware, the production of natural gas from KGD6 has come down from 45 to currently 38 mmscmd vis-a-vis the contractual commitment of 70 mmscmd. This;' you will appreciate, has caused a direct loss to the country's energy economy of around Rs15000 crore even going by a most conservative estimate, if only the cost differential of alternative feedstock by the gas-consuming sector is taken into account. The indirect loss, obviously, is much more. It is expected of the contractor handling the natural gas reserve to scale down the production of gas from KGD6 for achieving a premature price-rise from the Govt as a pressure-building tactics. But at the same time, it is also expected that the Govt would appropriately respond to such coercive tactics and decide as to whether the concerned field should continue to remain at all under the very contractor which is in perpetual default in terms of contract in the matter of production commitment. I understand, the Govt is very much empowered to make such review under the terms of contract. And I believe, such review is warranted in the interest of the nation. I, therefore, urge upon you to please appreciate the gravity of the issue and intervene so that the entire contract related to KGD6 is reviewed in view of serious default committed by the contractor. With regards,

l1i=~,
(TAPAN SEN)

Dr Monmohan Singh Prime Minister Govt of India New Delhi

C-1. Prateekee Abasan. 109 Ultadanga Main Road, Kolkata - 700 067

TAPAN SEN
MEMBER OF PARLIAMENT (RAJYA SABHA) EMBER: STANDING COMMITTEE ON PETROLEUM & NATURAL GAS MEMBER: CONSULTATIVE COMMITTEE FOR MINISTRY OF STEEl MEMBER: COMMITTEE ON PUBLIC UNDERTAKINGS (COPU)

'OFFICE : 13-A, ROUSE AVENUE NEW DELHI-110002 PHONE: 23221288, 23221306 FAX.: 23221284 RESIDENCE: 501, V P HOUSE, RAFI MARG, NEW DELHI-110 001 Tel: 2376 6546 Mobile: 9868181055 E-mail: tapan.sen@sansad.nic.in

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Dear Dr. Manmohan Singhji,

February 2012

Further to my letter dated 16th January 2012 seeking your intervention on production sharing contract related to KGD6 in view of serious default committed by MIs RIL, the contractor, I am constrained to invite your kind attention to followi~ extract(para 63) of the historic judgment by the Hon'ble Supreme Court on 2G Spectrum on Z" February 2012: In Reliance Natural Resources Limited v. Reliance Industries Limited, (2010) 7 SCC 1, P.Sathasivam J. with whom Balakrishnan, C.J., agreed, made the following observations: "It must be noted that the the people of this country. the public trust doctrine dealing with environmental constitutional mandate is that the natural resources belong to The nature of the word "vest" must be seen in the context of (PTD). Even though this doctrine has been applied in cases jurisprudence, it has its broader application."

Learned Judge then referred to the judgments In re Special Reference No. 1 of 2001 (2004) 4 SCC 489, M.C. Mehta v. Kamal Nath (1997) 1 SCC 388 and observed: "This doctrine is 'part of Indian law and finds application in the present case as well. It is thus the duty of the Government to provide complete protection to the natural resources as a trustee of the people at large." The Court also held that natural resources are vested with the Government as a matter of trust in the name of the people of India and it is the solemn duty of the State to protect the national interest and natural resources must always be used in the interest of the country and not private interests. In view of above reiteration of Hon'ble Supreme Court on the duty of the state to protect the national interest vis-a-vis natural resource, I urge upon you again to please intervene in the case immediately so that reasonable price of natural gas is ensured in national interest and not for private interest. As a matter of fact pricing of natural gas should be re-examined de novo by CAG based on actual cost of production at KGD6. With regards,

incerel
.
(TAPAN SEN)

Dr. Manmohan Singh Prime Minister Government of India New Delhi

C-1, Prateekee Abasan, 109, Ultadanga Main Road, Kolkata - 700 067

fAPAN SEN
MEMBER OF PARLIAMENT (RAJYA SABHA) BER: jEMBER: MEMBER: STANDING COMMITTEE ON PETROLEUM & NATURAL GAS CONSULTATIVE COMMITTEE FOR MINISTRY OF STEEL COMMITTEE ON PUBLIC UNDERTAKINGS (COPU)

OFFICE:

13-A, ROUSE AVENUE NEW DELHI-110002 PHONE: 23221288, 23221306 FAX: 23221284

RESIDENCE: 501, V P HOUSE, RAFI MARG, NEW DELHI-110 001 Tel: 23766546 Mobile: 98681 81055 E-mail: tapan.sen@sansad.nic.in

21st March .2012

Dear Dr. Manmohan Singh ji, There are disquieting media reports about PMO's intervention on MIs. RIL's plea for upward revision of KG 06 gas price of 4.2 dollar/mBtu. This price itself was fixed quite arbitrarily, hurting the interest of NTPC, a public sector power enterprise of global repute, which had been pointed out time and again to you by the undersigned. 2. The intervention, if true, appears to be unsolicited as Ministry of Petroleum had already on record rejected this unjustified plea by MIs. RIL as KG 06 gas price is valid for five years till 2014. As a matter of fact RIL's similar appeal was turned down in 2010 by EGOM, headed by Finance Minister. As you are kindly aware, price hike in natural gas will lead to more govt. subsidy in fertilizer as well as higher power tariff for consumers. It is therefore quite perplexing that while the govt. is on one hand crying hoarse on subsidy, PMO is reportedly asking Ministry of Petroleum to reopen the issue of pricing of KG 06 gas, ostensibly under the pressure of MIs. RIL. It is not clear as to what public interest prompted such reported intervention by PMO. 3. It is further shocking that RIL's record as a contractor of KG 06 gas field has been totally ignored before the intervention by PMO/EGOM. In this connection, please refer to reply of Ministry of Power, in Parliament on 20.02.2009 "NTPC invited bids under International Competitive Bidding for procurement of natural gas @ 132 trillion British thermal units per annum for Kawas-II and GandharII power projects for a period of 17 years. Reliance Industries was evaluated as the lowest techno commercially acceptable bidder and NTPC accepted its offer. Accordingly a Letter of Intent (LOI) was issued to RIL on 16.06.2004 which was duly acknowledged and confirmed by RIL. After the issuance of LOI, RIL did not come forward to sign the Gas Sale and Purchase Agreement (GSPA) and sought major changes in the agreed draft of GSPA. NTPC pursued with RIL at various levels and various meetings to sign the GSPA, as per the draft accepted by RIL during the bidding process. However in spite of all the efforts RIL did not sign the GSPA agreed during the bidding process." . NTPC ultimately had to file a suit as aggrieved party in Bombay High Court in December 2005 to get the gas at 2.34 dollar per unit for 17 years. The case is still subjudice and 2600 mw power-generation still remains elusive. 4. As on date, production from KG 06 field is less than 40 MMSCMO against assured 80 MMSCMO, and the reason has been explained by Shri Jaipal Reddy, Minister of Petroleum and Natural Gas in his letter to the undersigned on yth of this month, as quoted below. contd ....2

C-1, Prateekee

Abasan,

109, Ultadanga

Main Road.

Kolkata

- 700 067

fAPAN SEN
MEMBER OF PARLIAMENT (RAJYA SABHA) BER; , JEMBER; MEMBER; STANDING COMMITTEE ON PETROLEUM & NATURAL GAS CONSULTATIVE COMMITTEE FOR MINISTRY OF STEEL COMMITTEE ON PUBLIC UNDERTAKINGS (COPU)

OFFICE:

13-A, ROUSE AVENUE NEW DELHI-110002 PHONE: 23221288, 23221306 FAX: 23221284

-2-

RESIDENCE: 501, V P HOUSE, RAFI MARG, NEW DELHI-110 001 Tel: 2376 6546 Mobile: 98681 81055 E-mail: tapan.sen@sansad.nic.in

liAs regards the decline in the production of gas from KG 06 field, Directorate General of Hydrocarbons (DGH) has reported that the reasons for decline in gas production is due to drilling of only 22 wells (18 gas producing wells and 4 wells drilled but not connected or put on production) as against 31 producing wells approved for drilling up to March, 2012 according to Field Development Plan (FOP). The Contractor has expressed inability to firm up appropriate drilling locations on the plea of geological complexity. OGH has not agreed to the Contractor's contention and asked the Contractor to comply with the approved FOP. In addition, five out of total 18 gas producing wells in 01 and 03 fields have ceased to produce gas due to water-loading/sand ingress in the wells. One oil/gas producing well in MA field out of 6 oil/gas producing wells has ceased to produce oil/gas due to water loading in well.
II

Obviously by cutting down the production, the contractor is trying to arm-twist the govt. to increase the gas price...)
In view of the above you will agree that PMO owes a reply to the nation as to why instead of penalising RIL, the contractor for its acts of omission/commission, a channel is being opened for rewarding RIL through a price hike, irrespective of actual cost of production of KG 06 gas. I request you to kindly advice the PMO accordingly. With regards,

Dr. Manmohan Singh Hon'ble Prime Minister Govt. of India New Delhi

Copy to: Shri Jaipal Reddy, Minister of Petroleum & Natural Gas, G,=o...--r,"'I";:

~;:~ l
(TAPAN SEN) ( APAN SEN)

fA A
BER: ~MBER: MEMBER:

SE

MEMBER OF PARLIAMENT (RAJYA SABHA) STANDING COMMITTEE ON PETROLEUM & NATURAL GAS CONSULTATIVE COMMITTEE FOR MINISTRY OF STEEL COMMITTEE ON PUBLIC UNDERTAKINGS (COPU)

OFFICE: 13-A. ROUSE AVENUE NEW DELHI-110002 PHONE: 23221288. 23221306 FAX: 23221284 RESIDENCE: 501. V P HOUSE. RAFI MARG. NEW DELHI-110 001 Tel: 2376 6546 Mobile: 98681 81055 E-mail: tapan.sen@sansad.nic.in

31st March 2012

Dear Dr. Manmohan Singhji, This has reference to your DO letter dated 23.3.2012 acknowledging receipt of my letter dated 21.3.2012. regarding PMO's reported intervention on M/s RIL's plea for increase in KGD6 gas price. 2. In this connection it is gratifying to note that the Ministry of Petroleum and Natural Gas has again reconfirmed its stand on the issue vide reply to unstarred question no. 1509 dt 27.3.2012 in Rajya Sabha wherein it has been stated: 6n 6th September 2010, Reliance Industries Ltd. (RIL) represented to this Ministry that they have an offer for purchase of gas at higher rate than the rate approved by the EGOM and they sought guidance and as to how to proceed as per the PSC. RIL was informed that EGOM has approved the above price for 5 years from the date of commencement of supply and RIL was instructed to comply with the price finalized by EGOM. // 3. In view of the above any decision to revisit the gas price before five years i.e. 2014 under the pretext of "Pricing policy reforms to incentivise production' of natural gas", I am afraid, would be perceived as backdoor manoeuvre under the pressure of private gas producers, both domestic and foreign. PMO's reported advice for seeking government legal opinion on midterm price correction is in sharp contrast to its unsympathetic and "touch me not" attitude to government owned enterprises. It was not felt prudent by the government either to seek Law Ministry's opinion or to give legal support to the cause of NTPC, a Mahartana PSU when RIL went back on its offer to supply natural gas @ 2.34 dollar per unit for 17 years. NTPC is still fighting the case in High Court on its own. Level playing field warrants that if M/s RIL feels aggrieved on the present gas price, It should seek legal redressal on its own and it is not for the Government to explore possibilities to bailout M/s RIL or BP. This discriminatory approach becomes more glaring when PMO directs Maharatna PSU Coal India to sign Fuel Supply Agreement for 20 years with guaranteed delivery of 80 % contracted quantity of coal, while remaining conspicuously unreactive on "mysterious drop in KGD6 gas production" and being proactive to the unreasonable demand of price hike hefore the stipulated period of 5 years in 2014. I shall be grateful if you kindly clarify whether the actions/interventions by PMO to go out of the way to help private gas and power producers have your approval. I also sincerely hope that for the sake of energy security, you will kindly ensure that pricing of natural resources like gas or coal within the country and owned by the people of this country, is not dictated by domestiC/ foreign investor or hedge fund operator. from abroad. With kind regards

~;:l.
~lNSEN)

Dr. Manmohan Singh Prime Minister Government of India New Delhi

C-1. Prateekee Abasan. 109. Ultadanaa Main Road. Kolkata - 700 067

___" TAPAN SEN

/ MEMBER: MEMBER: MEMBER: MEMBER OF PARLIAMENT (RAJYA SABHA) STANDING COMMITTEE ON PETROLEUM & NATURAL GAS CONSULTATIVE COMMITTEE FOR MINISTRY OF STEEL COMMITTEE ON PUBLIC UNDERTAKINGS (COPU)

OFFICE:

13-A, ROUSE AVENUE N'EW DELHI-110002 PHONE: 23221288, 23221306 FAX: 23221284

RESIDENCE: 501, V P HOUSE, RAFI MARG, NEW DELHI-110 001 Tel: 2376 6546 Mobile: 98681 81055 E-mail: tapan.sen@sansad.nic.in

16th May 2012 Dear Dr. Manmohan Singhji, Thank you for your letter dated 09.05.2012 in response to my letter dated 21.03.2012 regarding PMO intervention on M/s RIL's plea for upward revision of KG-D6gas price of 4.2 dollar/rnbtu. It is unfortunate that instead of addressing any of the' substantive issues raised in my letter which was followed by another letter dated 31.03.2012, your letter formally accepts that a letter from M/s Reliancewas received by PMO and forwarded to Ministry of Petroleum & Natural Gas for obtaining legal opinion on the matter and placing it before EGoMon gas pricing. The above fact was well known but my substantive query as to what public interest prompted the , agenda of MIs Reliance to increase the gas price to be sent for legal opinion, when the same was already turned down by MOPNG, remains unanswered. As a matter of fact, you will kindly appreciate, this intervention and subsequent sequence of events are serious acts of omission in the face of desperate bid by the private party to make illegitimate gain before the expiry of the tenure of the present price at the cost of national exchequer and millions of power & fertililser consumers.

1. RIL contractor's plea was turned down by EGoM in 2010. The present plea for price hike of gas was
turned down by Ministry of Petroleum. The same was pointed out to you in my subsequent letter dated 31st March wherein the following reply to unstarred question 1509 dated 27.03.2012 in Rajya Sabha by Ministry of P&NGwas speciflcallv referred: "On 6th September 2010, Reliance Industries Ltd. (RIL) represented to this Ministry that they have an offer for purchase of gas at higher rate than the rate approved by the EGoM and they sought guidance and as to how to proceed as per the PSC. RIL was informed that EGoM has approved the above price for 5 years from the date of commencement of supply and RIL was instructed to comply with the price finalized by EGoM." 2. Obviously, the above assurance to Parliament to stick to five years agreement i.e. till 2014 by the ministry of petroleum cannot be overruled by PMO through review of the case by obtaining a legal opinion. Under the circumstances, reopening the matter for legal opinion constitutes an act of omission. 3. I had also clearly pointed out in my letter dated 21.03.2012 that RIL's previous record as a contractor on KGD6gas field vis-a-vis 2600MW NTPCplants of Kawas & Gandhar in Gujarat in year 2004 cannot be ignored. In an identical fashion RIL had first agreed to supply gas @ 2.34 dollar/rnbtu for 17 years and later retracted and did not sign the Gas sale and Purchase agreement. This led to suspension of work on power plants till now.
Neitherthe Ministry of Power nor PMO intervened in that case to get a legal opinion so that the PSU could get the gas from KGD6. NTPC had to approach the Bombay High Court. The case is still subjudice.

Contd/ - to page 2

C-1, Prateekee Abasan, 109 Ultadanga Main Road, Kolkata - 700 067

TAPAN SEN
MEMBER OF PARLIAMENT (RAJYA SABHA) AEMBER : STANDING COMMITTEE ON PETROLEUM & NATURAL GAS MEMBER: CONSULTATIVE COMMITTEE FOR MINISTRY OF STEEL MEMBER: COMMITTEE ON PUBLIC UNDERTAKINGS (COPU)

OFFICE:

13-A, ROUSE AVENUE NEW DELHI-110002 PHONE: 23221288, 23221306 FAX: 23221284

-2-

RESIDENCE: 501, V P HOUSE, RAFI MARG, NEW DELHI-110 001 Tel: 23766546 Mobile: 98681 81055 E-mail: tapan.sen@sansad.nic.in

But in the instant case, intervention made makes the case, which was turned down by MoPNG, reopened for a review through legal opinion and RIL stands unduely advantaged if not favoured to the extent that unlike NTPC, the contractor does not have to spend money and time through litigation. It has paved the way for RIL to find an alternative to stake its dubious claim for price hike of natural gas. 4. Further hike in price of natural gas will lead to high power tariff for millions of consumers and more government subsidy in fertilizer. Despite that, the contractor's bid of seeking a review of gas price fixed by EGoMfor five years at 4.2 dollar till 2014 has been allowed to be reopened after it was turned down by MoPNG.You may kindly appreciate that --not considerinq the following facts also constitutes an act of omission in the instant case: i. RIL had quoted 2.3 dollar/motu to NTPC'saforesaid plants of NTPCfor 17 years. ii. In Oman, the Indian fertilizer companies KRIBHCO and IFFCO get gas from Oman India Oil Company @ 0.77 dollar/rnbtu since January 2006 which has recently been increased by 15% after 6 years. The tenure of gas supply agreement (GAS) between Oman Oil Company and fertilizer companies is for 15 years from January 2006 to the year 2020, while RIL is seeking review of price after 3 years! iii. As for pricing, Oman is not insisting for international price of LNG for bench-marking their indigenous gas production. It may also be noted that in Canada the domestic gas price was only 1.74 dollar/motu. Hence any attempt to increase the domestic gas price on the plea of international price can only be construed as a mischievous means to propel the interest of the private contractor at the cost of government exchequer and power / fertilizer consumers. iv. As on date, production from KGD6 field is 34MMSCMD as against assured 80 MMSCMD,for reasons attributable to the contractor as pointed out in CAG report on KGD6. Obviously by deliberately cutting down the production, the contractor is trying to arm-twist the government to increase the gas price. Instead of a charade of legal opinion through Attorney General or Solicitor General I urge upon you to kindly take following action immediately. a) Tariff commission should be asked to assessthe actual cost of production of natural gas in KGD6. b) Simultaneously, the plea of RIL should be forwarded to CAGfor examination. I demand that no price hike should be allowed to MIs RIL irrespective of legal opinion before the expiry of contract period of 5 year l.e, before 2014 and the gas price of KGD6 be examined denovo after the report of Tariff Commission and CAG are received. With regards,

bt:t:
(TAPAN SEN) Dr. Manmohan Singh Prime Minister Government of India
New Delhi
C-1. Prateekee Abasan. 109 Ultadanga Main Road, Kolkata - 700 067